FxWirePro: AUD/JPY consolidation phase hovers at 38.2% Fibos, Leveraged trade via tunnel spread on and short hedge

Bears have managed to break below strong support at 83.789 levels.

On a broader perspective, after 7-8 months of consolidation phase now seems to be totally exhausted at 50% of Fibonacci retracements from the lows of 72.437 levels (Jun’16 lows).

Ongoing rallies are struggling to break out above 21DMA and 21EMAs; consequently, current prices are hovering at 38.2% Fibonacci retracement levels.

Most importantly, shooting stars have occurred at 21EMA & stiff resistance of 87.609 (50% fibos), more slumps on cards as the breach below 38.2% Fibos has been a better bearish clarity, current prices dropped below 7EMA.

As a result, a shooting star has occurred at 84.249 levels at this Fib. level and 21EMA, that is where the leading oscillators (RSI) is also sensing some sort of resistance at 49-50 levels, you observe the leading indicator gaining or struggling for strength in trend at this juncture (refer monthly plotting).

To substantiate this weakness, stochastic evidences %d crossover right from the overbought zone (i.e. 80 levels) to signal the intensified selling sentiments. MACD has remained below zero level which is bearish trajectory.

Trade Tips:

Well, as a result of above technical reasoning, on speculative grounds we advise tunnel spreads which are binary versions of the debit put spreads.

This strategy is likely to fetch leveraged yields than spot FX and certain yields keeping upper strikes at 83.6963 and lower strikes at 83.104 levels.

While we advise using short positions in futures contracts of mid-month tenors for hedging downside risks upto 81.335 levels.