FxWirePro: USD/JPY Apprehensive Bulls Hover At 100-EMAs On Spinning Top – Trading & Hedging Setup For Both Minor And Major Downtrends

USDJPY’s bears are still hovering at 100-EMAs on spinning top pattern at 107.494 levels, as the major trend still remains range-bounded swings upon a bearish engulfing with big real bodies (refer monthly plotting), the major trend is capped by 100-EMAs and 100-DMAs.

RSI signals faded strength, while stochastic curves have been indecisive. So is the case with the lagging indicators, MACD and EMAs are looking quite indecisive but slightly bearish bias.

While the minor trend is still continued to show volatility (oscillating between 108.244 and 106.925 levels), although minor trend has moved slightly upwards since 15th April, selling pressures counter these rallies. 

As stated in our previous post, consecutive hanging man, spinning top, long-legged doji and frequent failure swings at the stiff resistance nudge the current trend below DMAs as both leading oscillators (RSI & Stochastic curves) show downward convergence to signal the bearish momentum.

Contemplating both interim downswings and prolonged range-bounded major trend remains intact, we advocate trade tips as shown below:

At spot reference: 107.147 levels (while articulating), it is wise to deploy boundary options strategy using upper strikes at 107.529 and lower strikes at 106.925 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, we now like to uphold the same positions as the underlying spot FX likely to target southwards up to 105 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.