FxWirePro: Breach Below EUR/JPY’s 78.6% Fibo Signals Intensified & Renewed Bearishness – Trading & Hedging SetupWe’ve been constantly highlighting EURJPY’s weakness of late, please be noted that the bearish rout has intensified ever since the formation of

We’ve been constantly highlighting EURJPY’s weakness of late, please be noted that the bearish rout has intensified ever since the formation of hanging man at 120.857 levels and we managed to trace out this bearish pattern. 

Such massive price dips (almost 400-450 pips) in this minor trend is evident, after breaching below channel support, plummets prices below DMAs.

For now, the lingering weakness is still on the cards as both leading & lagging oscillators signal selling sentiments (refer daily chart). Hence, more slumps appear to be likely event as both leading (RSI & Stochastic curves) oscillators show downward convergence to the ongoing downtrend to signal the intensified selling sentiments. To substantiate this bearish stance, lagging indicators are also showing bearish DMA & MACD crossovers that indicates the extension of downtrend. 

Well, as stated in our previous post, it has plunged from the highs of 121.082 levels to the recent lows of 116.945 level. One can go through below weblink where we had advocated shorts a month ago, refer below weblink for more details: https://www.econotimes.com/FxWirePro-EUR-JPY-Interim-Bulls-Pave-The-Way-For-Fresh-Shorts-In-Major-Downtrend--Technicals-Trading-Hedging-Setup-1574768

On a broader perspective, the major downtrend remains intact below EMAs (refer monthly plotting), we’ve made this point also.. “although bulls attempt to test support at 78.6% Fibonacci levels, downswings may resume upon failure swings as both leading & lagging oscillators still in tandem with bearish sentiments on this timeframe as well”. 

Bears, in the major downtrend, have breached below 78.6% Fibonacci levels to remind us the renewed weakness. Hence, always remember ‘trend is your friend, unwise to buck the trend which is bearish now.’

Trading and hedging tips: 

At spot reference: 115.670 levels, contemplating above technical rationale it is advisable to trade tunnel options spreads on trading grounds, using upper strikes at 116.075 levels and lower strikes at 114.851 levels.

Alternatively, we advocated shorts in EURJPY futures contracts of mid-month tenors with a view to arresting potential dips, mid-month tenor meant May month’s deliveries. As further price dips are foreseen we would like to uphold the same strategy, one can also initiate with near-month expiries (i.e. May’2020).