FxWirePro: Buzzing Bears In EUR/JPY Upon Channel Breakdown, Hanging Man Intensifies Dips – Trading & Hedging Setup

As stated in our previous post, EURJPY bears have been gaining upper hand amid macroeconomic breakdown due to pandemic circumstance. After the highly volatile trading sessions, the pair has constantly been plummeting of late, from the highs of 121.082 levels to the recent lows of 116.945 level. 

Please be noted that we had advocated shorts more than a month ago, refer below weblink for more details: https://www.econotimes.com/FxWirePro-EUR-JPY-Interim-Bulls-Pave-The-Way-For-Fresh-Shorts-In-Major-Downtrend--Technicals-Trading-Hedging-Setup-1574768

Well, the prevailing price slumps in the minor downtrend of this pair is observed upon hanging man pattern at 120.857 level, the minor downtrend started after it breached below channel support (refer daily chart), ever since then the trend has been highly volatile for some time as there has been stiff tug of war between bulls and bears in the range of 116.119 to 120.322 levels. 

Amid this journey, bears managed to plummet the prices below 7, 21 & 100-DMAs to signify the bears’ upper hand.

For now, more slumps appear to be likely as both leading (RSI & Stochastic curves) and lagging oscillators show downward convergence to the ongoing downtrend to signal intensified selling sentiments.

On a broader perspective, the major downtrend remains intact below EMAs (refer monthly plotting), downswings may resume at any time upon failure swings at the stiff resistance of 61.8% Fibonacci levels as both leading and lagging oscillators in tandem with bearish sentiments on this timeframe as well.

Trading and hedging tips: 

On trading perspective, at spot reference: 117.433 levels, contemplating above technical rationale it is advisable to trade tunnel options spreads using upper strikes at 117.924 levels and lower strikes at 116.883 levels.

Alternatively, we advocated shorts in EURJPY futures contracts of mid-month tenors with a view to arresting potential dips, since further price dips are foreseen we would like to uphold the same strategy.