FxWirePro: USD/JPY’s Decisive Breakdown Alerts Deceptive Rallies, Major Trend Slides Below 100-EMAs – Trading & Hedging Setup

USDJPY’s minor trend turns bearish ever since the occurrence of 3-black crow pattern at 107.114 levels and frequent failure swings at stiff resistance (100-DMAs). The current price slides below 7, 21 & 100-DMAs with bearish crossover, consequently, bears managed to breakdown decisively below strong support of 105.999 levels (refer daily plotting).

While both leading oscillators (RSI & stochastic curves) signal intensified bearish momentum & lagging indicators (moving average & MACD) indicate downtrend continuation.

The minor has approached oversold zone but bears are still hovering below 105.999 levels as RSI signals faded strength, while stochastic curves have still been indecisive. But the trend indicators, MACD and EMAs are showing bearish crossovers to indicate more dips on the cards.

On a broader perspective, bears slid below 100-EMAs on spinning top formation, but the major trend is still stuck in the tight range, thereby, the intermediate consolidation phase now turns bearish, both leading & lagging oscillators in line with the downtrend (refer monthly plotting).

At spot reference: 105.630 levels (while articulating), it is wise to deploy boundary options strategy using upper strikes at 105.999 and lower strikes at 105.220 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 ahead of Fed monetary policies, on hedging grounds, we now like to uphold the same positions as the underlying spot FX likely to target southwards up to 103 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.