FxWirePro: USD/JPY Hammer, Spinning Top And Doji Intensify Volatility, Major Trend Still Wedged In Range – Trading And Hedging Setup

USDJPY minor trend has been volatile, it has moved slightly upwards through uptrend line. Where hammer, hanging man, and spinning top, shooting star and long-legged doji pattern candles intensified the volatility as both leading oscillators also signal the intensified weakness.

The bearish streaks are visible now as the upswings seem to have halted at the highs of 108.498 levels (refer daily chart). Although we could see some minor rallies, the vulnerable bulls are absolutely struggling for the momentum. Though they attempted to show some resistance, but we could observe failure swings at the stiff resistance zone of 108.244 – 108.463 levels.

On a broader perspective, the major trend still remains range-bounded swings upon a bearish engulfing with big real bodies and hammer patterns (refer monthly plotting), the major trend is capped by 100-EMAs and 100-DMAs.

With leading oscillators signal overbought momentum, while lagging indicators looking quite indecisive but bearish bias, contemplating both interim downswings and the major downtrend in the long term, prolonged range-bounded major trend remains intact.

Trade tips: At spot reference: 106.714 levels (while articulating), contemplating above technical rationale, it is wise to deploy tunnel spread options strategy using upper strikes at 107.211 and lower strikes at 105.826 levels. The strategy is likely to fetch exponential yields than the spot moves as long as the underlying FX remains between these two strikes.

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 105 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.