It has been broken yesterday on a closing basis which is likely to expose next resistance at 88.496.
Currently, the pair is struggling at 87.952 but with firm conviction we reckon that breaks above this resistance after the yesterday's green candle would certainly take this test 1 month highs back again.
Even if the prices drops, throw back to the apex point at 86.50 levels would be maximum level and crucial support is seen at that levels again.
More importantly, as shown in the diagram symmetric is spotted out,
Breakout on above direction: The future direction of the breakout can only be determined after the break has occurred. Even though a continuation pattern is supposed to breakout in the direction of the long-term trend, this is not always the case.
Breakout Confirmation: This break has to be considered a valid, because it is on a closing basis. We noticed a price bounce (about 1.40% breaks above) or time (sustained for 5 consecutive days) filter to confirm validity. So, what else are we waiting for?
For more substantiation, leading oscillators like and slow curves are showing positive convergence with the upswings; we believe this as bulls are getting active.
is currently trending at around 56.53.18 that has been showing upward convergence to the price bounces, while reached 80 levels but no convincing crossover of %D line.
Hence, it is advisable to buy at every decline for targets at around 88.496.
Deploy back spread on AUD/JPY’s HY vols
As we’ve run through the indications based on above technical reasoning, we would also like to advocate strategies so as to match the trend.
Vega on Long ATM Call = 494.75
Vega on Long (1.5%) OTM Call = 296.54
The current IV of AUDJPY ATM call is higher side at 14.58% which is good for writers, usually if the Vega of a long option position is positive and the implied rises or dips, the above stated option prices are directly proportional to the implied .
So in this case Vega both on long position is reasonably acceptable. It is desirable that at maturity the underlying exchange rate of AUDNZD to remain near short strikes in order to achieve highest returns.
Hence, we recommend it is better to cover all your shorts and as shown in the diagram purchase 2 lots of 15D at the money +0.51 delta calls and simultaneously short 1 lot of 1W (1.5%) out of the money call with positive theta in the ratio of 2:1.
The higher strike short calls because IV is inching higher at 14.58% (this is good news for option writers) and it finances the purchase of the greater number of long calls (ATM calls are overpriced, so we chose 1% OTM calls as well) and the position is entered for reduced cost.
If established for a net debit, the break-even point is equal to higher strike plus the maximum risk (higher strike minus lower strike plus the net debit paid).