FxWirePro: USD/JPY Bears Lined-Up On 3-Black Crows, Major Trend Prolongs Range – Trading & Hedging Setup

USDJPY has shown failure swings at 105.942 (i.e. 7-DMA levels) and plummet prices below 21-DMAs.

Minor trend turns bearish upon the occurrence of 3-black crow pattern at 105.401 levels and frequent failure swings at stiff resistance (refer daily chart), the current price attempting to nudge below DMAs. While both leading oscillators signal intensified bearish momentum and downtrend continuation on lagging indicators.

On a broader perspective, bears slid below 100-EMAs upon spinning top, shooting star & bearish engulfing patterns but major trend still stuck in tight range, the intermediate consolidation phase now turns bearish, both leading & lagging oscillators in line with the prevailing downtrend (refer monthly chart).

At spot reference: 105.720 levels, we advocate buying USDJPY tunnel spread with upper strikes at 105.999 and lower strikes 105.283 levels.

Alternatively, shorting USDJPY futures contracts of mid-month tenors have been advocated, on hedging grounds, we now like to uphold the same positions as the underlying spot FX likely to target southwards up to 103.50 levels in the medium run. Writers in a futures contract are expected to maintain margins in order to open and maintain a short futures position.