AUD/JPY has been forming an ascending wedge pattern since the start of June, and the prices are now near the formation top, indicating that a breakout can happen anytime soon. December 2019 swing high is the source of the current resistance line at the top of the said pattern.
AUD/JPY had an upward bias after the March low, and the flat tops along with rising lows indicating an ascending nature of the pattern point to a breakout to the upside.
A strong close above 76.87 can confirm a bullish breakout.
But the breakout will be in danger of fading out if price falters near 77.50, where the current zone merges with the trend-line starting from 2014. The area also has a series of swing-lows from early 2019.
The ascending wedge breakout might prove very strong and would help the pair to push past this substantial resistance area. But if the pair falls-off the resistance and drive below the breakout point plus the lower side of the wedge: around 76.2 – the reversal will be severe.
It is also possible for the pair to break down below the underside trend-line from here, and it will result in a bearish run. It could also turn into a fakeout and subsequent reversal higher.
It will be better for traders to go along with the initial breakout and be aware of the chances of the pattern failure. All-in-all, a sizable move is in the offing considering the pattern formation and the price near a formidable resistance.
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