FxWirePro: GBP/JPY interim swings respond to BOJ monetary shift but hammer pattern seeks confirmation bottom reversal

From last two-three days, the pair hasn’t been moving anywhere beyond 133.476 on north and 132.059 on southwards after testing supports at 130.880 levels.

Upswings take support at 130.880 levels and seem like momentary upswings responding to BOJs monetary policy as they have left policy rates unchanged at -0.1%.

But prior to that, the prices are slid below DMA curves on the daily chart. Amid these dips bears have managed to break below an important support at 134.656 levels, for now, the drag towards 130.535 or even 128.908 seem more likely.

Price declines likely to extend as bearish crossover seen on moving averages. As the current prices have drifted below both EMAs & DMAs, so downtrend would likely continue in the long run. 7DMA has also crossed below 21DMA.

On a broader perspective, hammer pattern occurs on monthly chart at 135.840 levels, but confirmation is needed for us to interpret this as a bottom reversal. We are not isolating this signal, both leading as well as lagging indicators have no signals for price recovery.

Momentary buying strength is seen on daily RSIs and stochastic curves but selling momentum is intensified as we can make out from the leading oscillators clearly converging downwards along with the dipping prices on monthly plotting.

While RSI (14) trending below 31 levels that signals the strength in selling interests.

Stochastic oscillators have reached oversold territory but no convincing %k crossover is seen, instead intensified selling momentum is observed.

Trade tips:

Well, since implied volatility is very high in JPY crosses on the back of BoJ's monetary policy, on the intraday speculative basis, it is good to buy one touch binary vega puts on every rally.

Alternatively, bears can stay short in mid-month futures for the desired targets to retest recent lows up to 128.602 levels with strict stop loss of 139.155 levels.