FxWirePro: USD/JPY minor rallies on back-to-back hammer formations, major trend still stuck in range – Trade boundary strikes and short hedge

USDJPY major stiff resistance levels are observed at 109.8377 (i.e. 21DMA levels) and 110.052 levels. The failure swings were observed at this level in the recent past.

Subsequently, the minor trend of this pair has declined so far, prior to which, Gravestone doji and Shooting star evidences dips, hammer counter slumps but restrained below 7DMAs (refer daily chart).

On the flip side, the strong support is seen at 108.646 levels, hammer pattern candles have occurred at 108.905 and 108.803 levels.

Ever since the occurrences of these bullish patterns at the bottoms, the rallies attempted to bounce above 7DMA levels, but unable to sustain above stiff resistance levels of 110.052-110.284 that indicates the uncertainty.

Both RSI and stochastic curves are showing downward convergence to the price curve that indicates the strength and intensified momentum in the bearish rallies, RSI has shown faded strength at 62 levels.

While the trend indicator (MACD) has also shown bearish crossover to substantiate the bearish stance.

The major trend is still stuck between 115.550 and 107.321 levels (refer monthly plotting), the trend shows failure swings exactly at 114.721 levels couple of times in the recent past and we figured out potential gravestone doji pattern on this timeframe.

Overall, although we see any abrupt upside traction and the major downtrend seems to be intact.

Trading tips: Contemplating above technical rationale, we advocate buying boundary options strategy with upper strikes at 110.284 and lower strikes at 109.7760, this strategy is likely to add magnifying effects to the yields as long as the underlying spot FX remains between these two strikes on expiration.

Alternatively, maintain short hedges by adding shorts in futures contracts of mid-month tenors with a view to arresting downside risks.

Currency Strength Index: FxWirePro's hourly USD spot index has shown 52 (which is bullish), while hourly JPY spot index was at 88 (bullish) while articulating at 06:13 GMT. For more details on the index, please refer below weblink:

http://www.fxwirepro.com/currencyindex.

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