FxWirePro: GBP/JPY display engulfing – Bid DT calls as bulls ride on inverted head and shoulder, hammer, uphold directional hedge

Technical analysis (chart and candlestick patterns occurred): GBPJPY has been in consolidation phase of-late on both minor and major trend. 

Well, on daily plotting, Inverted head & shoulder, hammer and engulfing formations are traced out that signal strength in this consolidation phase, consequently, as you can see bulls have taken-off rallies above DMAs, whereas gravestone doji counters at peaks of rallies.

Last month, we’ve seen the flurry of bullish patterns, such as inverted head & shoulder with the head at 130.699, shoulder 1 at 141.176 and shoulder 2 at 141.009 levels.

Hammer pattern candlesticks have occurred at 135.992 and 142.689 levels on daily and monthly plotting respectively. Ever since then bulls rout is quite visible, for now, the uptrend seems most likely to prolong upon bullish engulfing pattern at 146.222 and bullish MACD crossovers, while momentum oscillators also substantiate intensified bullish momentum on monthly terms. 

On a broader perspective, the major downtrend that went in the consolidation phase has now continued bearish streaks again (refer monthly plotting), where the bearish engulfing pattern has also occurred at 146.754 and rail-road pattern at 144.165 levels on monthly terms to nudge prices below EMAs.

Hence, the major downtrend retraced 78.6% Fibonacci levels upon bearish patterns also, Both momentum indicators in line with the intermediate price rallies. 

Trade tips: At spot reference: 147.154 levels, on daily trading grounds, contemplating above technical rationale, we advocate constructing double touch call option strategy, using upper strikes at 147.794. The strategy is likely to fetch leveraged yields as long as the underlying price keeps spiking on the expiration.

Alternatively, ahead of BoJ’s monetary policy meeting that is scheduled for this week, we advocate initiating longs in GBPJPY futures contracts of Mar’19 delivery as further upside risks are foreseen and simultaneously, shorts in futures of May’19 delivery for the major downtrend. Thereby, one can directionally position in their FX exposures. The directional implementation of the same trading theme by further allow for a correlation-induced discount in the options trading also if you choose strikes appropriately.

Currency Strength Index: FxWirePro's hourly GBP spot index is flashing 72 (which is bullish), while hourly JPY spot index was at -113 (bearish) while articulating (at 04:32 GMT).

For more details on the index, please refer below weblink: http://www.fxwirepro.com/currencyindex