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FxWirePro: USD/JPY Chartpack – Technicals and FX Derivatives Trade Setup
USDJPY’s bounce back from the lows of 104.446 to the 108.259 levels is considerable, the interim rallies now seem to be edgy as stochastic enters overbought territory.
However, the prevailing upswings could extend further up to the stiff resistance of 108.841 and 109.025 levels. The previous upswings are restrained below these stiff resistance levels.
21-SMA – 106.635
7-DMA – 107.509
RSI shows strength at 57 levels where it faded and showed downward convergence to the downswings to indicate selling strength.
But at this juncture, we could foresee bullish trend sentiments to prolong upon the bullish EMA and MACD crossovers.
On a broader perspective, the major downtrend has now resumed on a bearish engulfing pattern with big real body (refer monthly plotting), slumps below EMAs have retraced more than 61.8% Fibonacci levels as both leading oscillators on this timeframe are also in tandem with the selling sentiments and lagging indicators are quite indecisive but bearish EMA & MACD crossover signals weakness. Contemplating both interim uptrend and downtrend in the long-term, swings now likely to prolong in the range-bounded major trend.
Trade tips: At spot reference: 108.047 levels (while articulating), contemplating above technical rationale, it is wise to deploy boundary options strategy using upper strikes at 108.454 and lower strikes at 107.847 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, on hedging grounds ahead of Fed and BoJ’s monetary policies that are scheduled this week, 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.