FxWirePro: GBP/JPY Short Trading and Hedging Setup on Extended Inverse Saucer Pattern

GBPJPY minor trend has constantly been sliding below 7-DMAs so far, the interim bulls attempt to bounce back but restrained below 7-DMAs.

No substantiation is observed for the interim rallies from both leading and lagging indicators, for now, more slumps appear to be on the cards.

21-DMA – 133.064

7-DMA – 131.543

RSI and fast stochastic curves, despite being in oversold territory, show downward convergence to the price downswings that indicates selling sentiments are still imminent.

On a broader perspective, the consolidation phase fails at 50% Fibonacci levels (refer monthly chart), bears extend through inverse saucer in the minor trend, with bearish engulfing pattern at 146.754 and 136.767 levels with the intensified selling momentum. 

Thereby, the major downtrend is back in action as downswings, on this timeframe, retraces 88.6% Fibonacci levels and still on the verge of retracing the same levels again.

Trade tips: At spot reference: 131.619 levels, contemplating above technical rationale, one can execute tunnel options spreads using upper strikes at 132.544 and lower strikes at 130 levels. Such exotic option likely to cap upside movement and favor prevailing selling sentiments and fetch leveraged yields as compared to spot.

Alternatively, amid Brexit decision shorting futures of mid-month tenors are advocated with a view of arresting further potential slumps. Writers in a futures contract are expected to maintain margins in order to open and maintain a short futures position.