FxWirePro: GBP/JPY shooting star proves “history repeats again” in major trend, engulfing pattern candle likely to drag price slumps

Although GBPJPY halted price drops for today at 139.520 levels, after streaks of bearish swings we’ve seen the stern bearish engulfing candle with big real body yesterday at 140.058 levels, the bulls countered today despite the bearish sentiments lingering around the corner (refer daily chart).

Well on a broader perspective:

The major trend has been bearish.

From last two months’ downswings have taken the pair to slide below 7EMA levels (refer monthly chart).

Historically, a shooting star candle occurred at 144.328 levels, subsequently, dropped to the lows of 135.608 levels.

Please also be noted that last month again the shooting star pattern candle has occurred at 142.694 levels to signal weakness again, thereby bears in the major downtrend seem to be gaining traction to evidence more slumps.

In consolidation phase, the breach above 23.6% Fibonacci retracement levels are not convincing to bet upon long-term bullish targets, prices were restrained well below 21EMA.

As a result intensified bullish momentum has been shrunk away in this consolidation phase, consequently, bulls have been unable to retrace even upto 38.2% Fibonacci levels or 21EMA levels.

Buying momentum is absolutely shrunk away for now on this timeframe.

While MACD on the other hand, signals indecisiveness on monthly terms remaining in the bearish territory but the same has signaled the extension of the bearish trend on daily charts.

The stochastic oscillator has entered into oversold trajectory but absolutely no traces of %k crossover which is a bullish signal. Instead, selling momentum has been intensified.

While RSI has also been converging to the price drops that lead the robust strength in the downtrend.

Monthly RSI (14) is trending below 48 levels that signal losing strength in the previous buying interests.

Well, overall we anchor the prevailing bearish stance is backed by both leading as well as lagging oscillators, one can think of shorts in this pair only for the short-to-medium terms basis, wait for a better clarity for long term investments.

Trade tips:

For the daily trading, tunnel spreads are best suitable, so snap the rallies to deploy higher strikes in the binary puts while shorting lower strikes simultaneously.

Alternatively, at this juncture, contemplating lingering bearish indications, on hedging grounds we recommend shorting near-month month futures as the underlying spot FX likely to target towards 137.339 levels in near run.

Writers in a futures contract are expected to maintain margins in order to open and maintain a short futures position.