FxWirePro: EUR/JPY Takes Supports at 76.8% Fibos For Interim Rallies But Recoveries Unlikely in Major Downtrend – Trading and Hedging Setup

Technical chart and candlestick patterns formed – EURJPY has seen mild interim price rallies that are intensified from the last couple of days upon the test of strong support at 115.907 (i.e. 76.8% Fibonacci level, refer monthly chart) as the minor trend shows momentary rallies. 

On the flip side, 

Bearish engulfing, gravestone doji and 3-black crow patterns nudge these prices below DMAs and EMAs (daily chart). While both leading and lagging indicators still substantiate weakness to reassess the downtrend. Interim upswings may extend but they are not game changer, they are just momentary.

While the major downtrend remains intact as the bearish engulfing evidences price drops below EMAs (refer monthly plotting).

For now, weakness is most likely to prolong as the bearish swings are backed by both momentum oscillators as both RSI & stochastic curves show 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: 117.735 levels, on trading perspective, it is advisable to participate in the prevailing rallies and execute one-touch call option, using upper strikes at 118.047 levels, the strategy is likely to fetch leveraged yields as long as the underlying spot FX keeps spiking above upper 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.