FXWirePro: Yen likely to appreciate versus pounds – hedge GBP/JPY relentless slumps with backspreads

Well.., continued streaks of dips of GBPJPY are fetching us the desired yields. We have already advised bearish trend in our earlier article on 23rd, thereafter, you can have a view on daily charts (the bearish signal spotted as you can see that from circled area).

Accordingly, it was suggested hedging framework as well, for now it is reckoned that the underlying currency GBPJPY to make a large move on the downside. So, longs on 2 lots of At-The-Money -0.50 delta puts would function effectively.

For our previous posts: http://www.econotimes.com/FxWirePro-Expect-further-GBP-JPY-slumps-upon-hanging-man-formation-PRBS-arrests-downside-risks-92683

The dips from 184.55 levels to the current levels of 181.912 boost up our medium term bearish stance. Whoever has followed this strategy either minted money or hedged their currency risks of GBP's depreciation, for rest all it is just a history.

We now continue to maintain the same strategy for fresh hedgers by using small bounces to help our ITM shorts. With the below technical reasoning, we recommended arresting potential downside risks of this pair by hedging through Put Ratio back Spread.

We continue to urge further corrections on GBPJPY upon the formation of hanging man pattern candle on peaks of uptrend at around 193.456 levels on monthly chart (hope you have observed that in our earlier post). We now reckon that this hanging man followed by two long real body red candles have more downside potential and would reveal a medium term downtrend direction. It is important to emphasize that the hanging man pattern is a warning of potential price change, not a signal, in and of itself, to go short. Overall pattern on the pair fixes it bearish view for a target of 177.125 to 175 levels in medium terms.