FxWirePro: Spot on CAD/JPY lingering bears on shooting star and hanging man patterns, major downtrend stuck in range – Trade tunnel spreads

On daily plotting of CADJPY, hammer candlestick patterns at 82.529 and 82.678 levels have taken off rallies above 7 and 21 DMAs, but spinning top, shooting star and hanging man candlesticks which are bearish patterns have popped at stiff resistance to counter-rallies.

Stiff resistance zone is observed at 84.998 – 85.204 levels, spinning top at 84.074, shooting star at 84.631 and hanging man at 84.532 levels have occurred to signal the weakness. Both momentum oscillators are indicating the shrinking bullish momentum. Whereas the trend indicators (DMA and MACD) signal upswings to prolong further.

On a broader perspective, the major downtrend has gone in the consolidation phase since December 2015 (refer monthly plotting for range-bounded trend). Shooting star pattern has occurred at 83.969 levels hampers previous bullish momentum on this timeframe.

Trade tips: Well, on trading perspective, at spot reference: 84.556 levels, it is advisable to buy tunnel spreads using upper strikes at 84.998 and lower strikes at 84.209 levels, the strategy is likely to fetch leveraged yields as long as underlying spot FX keeps dipping but remains above lower strikes on expiry duration.

Alternatively, on hedging grounds, we advocate shorting futures contracts of mid-month tenors as the underlying spot FX likely to target southwards 83.500 levels in the near terms.

Writers in a futures contract are expected to maintain margins in order to open and maintain a short futures position.

Currency Strength Index: FxWirePro's hourly CAD spot index is inching towards 22 levels (which is bullish), while hourly JPY spot index was at -135 (bearish) while articulating (at 06:15 GMT). For more details on the index, please refer below weblink:

http://www.fxwirepro.com/currencyindex