FxWirePro: EUR/JPY momentary bullish traction on inverted head and shoulder pattern – Trade one touch calls and short hedge ahead of BoJ

EURJPY chart and candlestick pattern formed – A stern resembling bullish engulfing pattern candle with big real body has occurred at 130.855 levels (refer daily chart) that completes inverted head and shoulder pattern. The pair forms inverted head and shoulder pattern with head at 124.903, shoulder 1 at 127.868 and shoulder 2 at 126.643 levels.

Consequently, you can make out sharp current rallies that spike above 7DMAs on this bullish pattern, for now, more rallies on card as both leading & lagging indicators signal intensified momentum and bullish trend continuation.

While on intermediate trend, consecutively shooting star, hanging man and spinning top patterns pop up at around 61.8% Fibonacci levels from the lows of June 2016. On the contrary, hammer patterns have occurred at 128.830 levels sensing support at 124.742 (i.e. 38.2% Fibonacci levels) to counter the bearish sentiments (refer monthly chart). Bulls, on this timeframe, resume after retracing 38.2% fibonacci levels.

While both leading and lagging indicators signal strength and momentum in momentary upswings and weakness remains intact in the intermediate trend (refer both daily and monthly plotting).

Trade tips: On trading perspective, at spot reference: 131.354 levels, it is advisable to buy one touch call option, use strikes at 131.957 levels, the strategy is likely to fetch leveraged yields as long as the underlying spot FX keeps spiking further until expiration.

Alternatively, ahead of Bank of Japan that is scheduled to announce its monetary policy on Wednesday morning European time, we advocate shorts in futures contracts of mid-month tenors with a view to arresting potential dips.

Currency Strength Index: FxWirePro's hourly EUR spot index is flashing at 21 levels (which is mildly bullish), while hourly JPY spot index was at -124 (highly bearish) while articulating at 06:37 GMT. For more details on the index, please refer below weblink:

http://www.fxwirepro.com/currencyindex