FxWirePro: AUD/JPY Interim Bulls Struggling At Rising Wedge Support, 7-EMA Caps Major Trend on Head and Shoulder Pattern

AUDJPY minor trend has formed rising wedge pattern, where the interim bulls are currently struggling to test the support at wedge baseline (refer daily plotting). 

Thereby, we could observe the most likely hammer pattern candle at 73.853 levels.

The current price slumps below DMAs coupled with bearish MACD and DMA crossovers indicates weakness, but this should only be confirmed by the breach below wedge support. 

More slumps are likely upon the breakdown as both the leading and lagging oscillators are in bearish bias.

RSI and Stochastic curves are showing downward convergence to the prevailing downswings that indicates the strength and selling momentum. Bearish DMA and MACD crossovers substantiate this downtrend.

On a broader perspective, head and shoulder pattern has occurred on the major downtrend with head at 105.433, shoulder 1 at 90.027 and shoulder 2 at 90.305 levels (refer monthly chart).

Bears, in the major downtrend, disregard hammer formation at strong support of 78.578 levels , downtrend extends on the head and shoulder pattern. 

RSI, stochastic curves, DMA and MACD are bearish bias on this timeframe as well.

Overall, as we could foresee further downtrend in the months to come, on hedging grounds we advocate shorting futures contracts of mid-month tenors as the underlying spot FX likely to target southwards below 70.500 levels in the medium run. Writers in a futures contract are expected to maintain margins in order to open and maintain a short futures position (spot reference: 73.785 level).