FxWirePro: EUR/JPY Chartpack – Technicals & Trade Setup

EURJPY has seen mild interim price rallies from 2 days but that appears to be momentary as the minor trend is restrained below 21-DMAs. The failure swings likely to bring in a renewed weakness.

Technical chart and candlestick patterns formed– Hammer pattern candles popped-up at 116.235 (on the daily chart) and 124.601 levels (on the monthly term) that cause mild upswings, whereas bearish engulfing, gravestone doji and 3-black crow patterns nudge these prices below DMAs and EMAs. 

With steep slumps, 3-black crow pattern has completed at 118.353 and bearish engulfing occurred at 117.959 level to plummet prices below DMAs (refer daily chart), while the bearish swings have been developing on the breach below the double top neckline. While both leading and lagging indicators substantiate weakness. 

The intermediate trend also, bearish engulfing evidences price drops below EMAs (refer monthly chart). For now, the current major trend most likely to prolong bearish swings that are backed by both momentum oscillators as both RSI & stochastic curves show the downward convergence to the prevailing price dips that signal bearish strength & the intensified selling momentum and weakness remains intact on the monthly terms.

Trade tips:On trading perspective, at spot reference: 117.555 levels, contemplating above technical rationale it is advisable to snap deceptive rallies and construct tunnel options spread, using upper strikes at 117.765 and lower strikes at 117.110 levels, the strategy is likely to fetch leveraged yields as long as the underlying spot FX keeps dipping but remains above lower strikes on the expiration.

Alternatively, we advocated shorts in futures contracts of mid-month tenors with a view to arresting potential dips, since further price dips are foreseen we would like to uphold the same strategy.