FxWirePro: Can EUR/JPY bears extend inverted saucer pattern despite likely bullish engulfing? Use synthetic puts at stiff resistance of 116.369

The bulls in this pair have been spiking from last 4 days in the major downtrend from the lows of 111.068 to the current 116.270 levels.

Why are we calling the major trend as bearish? You may probably understand if you look at slightly longer time frame charts (i.e. weekly and monthly graphs), despite these upswings the current prices EMAs.

Moreover, an “inverted saucer pattern” has been traced out on weekly plotting that is now on the verge of extension, the price declines up to 115.502 levels up to is quite possible.

Prior to this, bears have managed to break below the baseline of falling wedge formation (see again on the weekly graph).

The break below 120.478 brings in a more bearish environment, the current prices remain well below EMAs, and the downtrend is in conformity to both leading & lagging indicators, any abrupt upswings shouldn't panic.

MACD is also not deviating from this bearish stance, it’s been oscillating below zero level which is a bearish trajectory since the end of 2014.

Currently, on weekly and monthly plotting RSI (14) has been converging downwards according to the price declines to signify anytime the momentum in selling pressures can be back in business.

The most probable scenario would be that it may retest 109 levels as a next strong support again.

Hence, using these deceptive rallies, it is smart to stay short in this pair via a synthetic long put is created when short underlying spot positions are pooled with an ATM long call of the same series.

The synthetic long put is so termed as these positions have the same payoff potential as long put.

The strategy breaks even when the underlying spot price has declined by an amount equal to the premium paid for the option on expiration. So, breakeven would be the initial short price - premium paid on call.

An increase in volatility would have a positive impact on this strategy, all other things equal. For one thing, it would tend to boost the long call option's resale value.