AUDJPY - Zoom out and take a look at the big picture....
Massive head and shoulders pattern forming since 2010. Perfect symmetry with both shoulders at the exact same price. Blue curved line displays evidence of a sliding top (almost parabolic move) since 2018.
AUDJPY weakness is highly associated with risk-off sentiment. Market risks are looming behind every corner.
One last thing.... Retail sentiment is extremely bullish. Long / Short ratio --> 4.76 to one.
Two market certainties.... 1) The majority (especially retail) is always on the wrong side of the trade. 2) Banks love causing retail carnage.
Similar, but not as extreme sentiment in base currencies vs. USD USDJPY --> 3.26 AUDUSD --> 3.33
More pain for AUD longs / JPY shorts on the horizon imo.....
I'm a beginner when it comes to chart pattern and i was wondering if this would be considered a H&S. Thanks for confirming this to me, i'm wondering if because there was a retest to the resistance and rejection, that this would indicate a down trend to test resistance at 70.00 with the possibility to continue further down? Or due to market valuation generate a bounce from 70.00 generating a bull trend?
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@Terramoto, Thanks for your comment. The pattern itself is a textbook example of a H&S. Saying that, is a very large pattern and the neckline is a strong long term support level, which has been defended by bulls in the past. A closer look at the price action, I see....
1) A strong sell-off breaking below the neckline (Blue dashed line), finding support at the wick low from the Jan 2019 flash crash. (Strong impulsive moves are followed by periods of consolidation --> sideways trading within a range / pullback)
2) We see a relief bounce back above the neckline. (Result of either a) Shorts covering positions b) Longs stepping in to defend the support level.
3) Bears attempt a pre-breakout squeeze, posting lower highs as they push price back down to support. As you pointed out, we see a strong reaction from the 70 level (300 pip bounce).
4) The swing high is still a lower high. Price continues a move lower in the direction of the prevailing trend.
for confirmation
5) Indication that we are transitioning to a bull trend would require bulls to secure a higher low, push price above resistance and post a higher high.
We might see repeated tests and rejections of the 70 level. If the rejections produce smaller bounces each time, it would indicate bulls are tiring of protecting this level and at some point it will break. Truth is nobody can offer you a conclusive answer to your question. You can use correlations to other instruments for confirmation --> A sell of in S&P would trigger a risk off scenario and support further downside in AUDJPY.
My bias is further downside....
Selling at range highs and buying at range lows, watch for clues price is preparing to breakout through support / resistance.