FxWirePro: USD/JPY technical study for risk/reward and short hedge with trade edge

Although USDJPY sees some mild rally today, the trend is currently drifting in sideway at around 108.346 levels. 

Market profile on 4H: 

Point of control (PoC) is at 108.348, 

Unfair highs – 108.401

Unfair lows – 108.269

Value area (VA) – 108.344 – 108.338

21-SMA – 108.4625

7-DMA – 108.3891

The upswings are restrained below 108.3891 (i.e. 7-SMA levels).

RSI – Faded at 56 – 57 levels, which is shrinkage of strength in the previous mild upside sentiment.

At this juncture, we could foresee sideway to little bearish sentiments to prolong as the minor trend of the pair has failed at around the stiff resistance of 108.546 levels quite a few times in the recent past upon the bearish SMA crossover, hence, the prevailing interim upswings are likely to restrain below 7 & 21-DMA and the stiff resistance of levels.

Well, on the other hand, if the market is balanced, it has already found the point of control which is the fair price, and that’s where it will have an equal number of options holders and writers. It is most likely to generate range bound day as the prevailing price revolves around the PoC.

On a broader perspective, the major downtrend has now resumed with a bearish candle of big real body (refer monthly plotting), slumps below EMAs have retraced more than 61.8% Fibonacci levels as both leading on this timeframe are also in tandem with the selling sentiments and lagging indicators are quite indecisive but bearish EMA & MACD crossover signals weakness.

Trade tips: At spot reference: 108.341 levels, contemplating above technical rationale, it is wise to snap the deceptive rallies to initiate fresh short build ups for targets up to 108.234 levels with strict stop loss of 108.389 level, thereby, one can attain 1:3 risk/reward which can keep us at a smart edge.

Alternatively, on hedging grounds ahead of Fed and BoJ’s monetary policies that are scheduled for the next week, shorting USDJPY futures contracts of mid-month tenors have been advocated, we now like to uphold the same positions as the underlying spot FX likely to target southwards below 106 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.

Currency Strength Index: FxWirePro's hourly JPY spot index is inching towards 59 levels (which is bearish), and hourly USD spot index has bearish index is creeping at 71 (bullish) while articulating (at 05:06 GMT). 

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