FxWirePro: USD/JPY Uptrend Halt On Overbought Tantrums But 7-DMA Cushions Bulls – Trading & Hedging Setup

USDJPY’s bears are still hovering at 7-DMAs on overbought pressures, as the minor trend still remains bullish bias (refer daily plotting), while the major trend is cushioned by 100-EMAs.

RSI signals faded strength, while stochastic curves have been indecisive. So is the case with the lagging indicators, MACD and EMAs are looking quite indecisive but slightly bearish bias.

The minor trend continued to show volatility (oscillating between 109.850 and 109.379 levels), although minor trend has moved slightly upwards since 29th May, selling pressures counter these rallies. 

For now, more rallies likely only on regaining bullish momentum as 7-DMA cushions bulls.

Contemplating both minor uptrend and prolonged range-bounded major trend remains intact, we advocate trade tips as shown below:

At spot reference: 109.499 levels (while articulating), it is wise to deploy boundary options strategy using upper strikes at 109.757 and lower strikes at 109.367 levels. The strategy is likely to fetch exponential yields than the spot moves as long as the underlying FX remains between these two strikes.

Alternatively, shorting USDJPY futures contracts of mid-month tenors have been advocated ahead of Fed and BoJ monetary policies after lockdown phase, on hedging grounds, we now like to uphold the same positions as the underlying spot FX likely to target southwards up to 107.50 levels in the medium run. Writers in a futures contract are expected to maintain margins in order to open and maintain a short futures position.