FxWirePro: USD/JPY gravestone doji to disrupt interim rallies, major trend stuck in range but bearish bias – Risk/reward trades and short hedges

USDJPY’s stiff resistance is observed at 108.841 and 109.025 levels. The previous upswings are restrained below these stiff resistance levels.

Gravestone doji keeps a check on hammer: The hammer pattern at 107.161 level that created interim rallies from 106.780 to the recent highs of 108.991 levels.

These upswings are restrained below stiff resistance zone of 108.841 – 109.025, the failure swings have managed to breach below DMAs. Again, the short-term has rebounded from 107.211 levels but restrained below stiff resistance zone and shown failure swings.

Consequently, gravestone doji has occurred at 108.633 levels and showing slumps about -0.10% for the day.

21-SMA – 108.191

7-DMA – 108.261

RSI – Faded strength at 57 levels is observed, and shows downward convergence to the prevailing slumps to indicate selling strength in the ongoing downtrend.

At this juncture, we could foresee bearish trend sentiments to prolong on the major trend upon the bearish EMA and MACD crossovers.

On a broader perspective, the major downtrend has now resumed with a bearish candle of big real body (refer monthly plotting) after the formations of bearish engulfing candles, slumps below EMAs have retraced more than 61.8% Fibonacci levels as both leading oscillators on this timeframe are also in tandem with the selling sentiments and lagging indicators are quite indecisive but bearish EMA & MACD crossover signals weakness.

Trade tips: At spot reference: 108.601 levels (while articulating), contemplating above technical rationale, it is wise to snap any deceptive rallies to initiate fresh short build-ups for targets up to 108.191 levels with strict stop loss of 108.841 level, thereby, one can attain a 1:2.5 risk/reward which can keep us at a smart edge.

Alternatively, shorting USDJPY futures contracts of mid-month tenors have been advocated, on hedging grounds ahead of BoJ and Fed’s monetary policies that are scheduled on 29th and 31st July, we now like to uphold the same positions as the underlying spot FX likely to target southwards below 106 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.