FxWirePro: GBP/JPY Inverse Saucer Drags Major Downtrend Upto 88.6%, Hanging Man Hampers Interim Rallies

GBPJPY minor trend has constantly been sliding below DMAs so far, the interim bulls attempt to bounce back with the hammer pattern that takes above 7-DMAs.

The hammer pattern at 127.153 levels has brought the mild upswings, while hanging man has popped-up 129.550 levels to counter nudging prices back below 7-DMAs. We could foresee more slumps on the cards upon overbought pressures.

21-DMA – 129.025

7-DMA – 129.635

RSI and fast stochastic curves, at this juncture, show faded strength in the recent price rallies (faded strength at 45 levels).

On a broader perspective, the consolidation phase fails at 61.8% Fibonacci levels (refer monthly chart), bears extend through inverse saucer in the minor trend, with the bearish engulfing pattern at 146.754 and 136.767 levels with the intensified selling momentum. 

Thereby, the major downtrend is back in action as downswings, on this timeframe, retraces 88.6% Fibonacci levels and still on the verge of retracing the same levels again.

Trade tips: At spot reference: 129.333 levels, contemplating above technical rationale, one can execute tunnel options spreads using upper strikes at 130.352 and lower strikes at 128.472 level. Such exotic options likely to cap upside movement and favor prevailing selling sentiments and fetch leveraged yields as compared to spot.

Alternatively, amid Brexit decision shorting futures of mid-month tenors are advocated with a view of arresting further potential slumps. Writers in a futures contract are expected to maintain margins in order to open and maintain a short futures position.