FxWirePro: EUR/JPY flurry of bearish patterns move in sync with price and volumes confirmation – Trade tunnel spreads and short hedge

EURJPY chart and candlestick pattern formed – Back-to-back hanging man, gravestone doji and shooting star patterns occur at peaks of levels (refer 2H chart) that plummet prices below 7SMAs, consequently, the overbought momentum is observed.

The same patterns have occurred even on monthly terms at 61.8% Fibonacci retracement levels, shooting star 132.336 and hanging man pattern at 135.157 levels (on monthly terms). 

While both momentum and trend indicators signal weakness. 

As stated previously in our write-up, the intermediate trend after the bearish pattern candles has resumed major downtrend, slides below EMAs & head towards 38.2% Fibonacci levels of 2014 December highs & 2016 June lows, both leading & lagging indicators signal weakness (refer monthly chart). 

Trade tips: On trading perspective, at spot reference: 128.067 levels, it is advisable to execute tunnel spreads, use upper strikes at 128.290 levels and lower strikes at 127.886 levels, the strategy is likely to fetch leveraged yields as long as underlying spot FX keeps dipping but remains above lower strikes on expiration.

Alternatively, as ECB rhetoric continued to evolve dovish fashion, we uphold shorts in futures contracts of mid-month tenors with a view to arresting potential dips.

Currency Strength Index: FxWirePro's hourly EUR spot index is flashing at 116 levels (which is bullish), while hourly JPY spot index was at -105 (bearish) while articulating at 05:12 GMT. For more details on the index, please refer below weblink:

http://www.fxwirepro.com/currencyindex