FxWirePro: USD/JPY Bears Breakdown Wedge Support, Major Trend Attempts To Form Triple Bottom In Range – Trading & Hedging Setup

USDJPY minor trend moved in rising wedge pattern so far. But for now, bears have managed to breakdown below wedge support, where the price plunges below 108.885 levels or -1.13% upon back-to-back hanging man, long-legged doji and shooting star candles at the stiff resistance of 109.723 levels, the bearish patterns restrain the current trend below 7DMAs as both leading oscillators signal the intensified weakness.

The bearish streaks from the highs of 109.727 levels seem to have halted at 109.144 (i.e. 21-DMAs, refer daily chart).

Although we could see some minor rallies, the vulnerable bulls are absolutely struggling for the momentum. Though they attempted to show some resistance, but we could observe failure swings at the rising wedge resistance and the stiff resistance zone of 109.723 levels.

On a broader perspective, the major downtrend still remains intact on a bearish engulfing patterns with big real bodies (refer monthly plotting), the major trend is capped by 100EMAs but is now stuck in the tight range.

With leading oscillators signal overbought momentum, while lagging indicators looking quite indecisive but bearish bias, contemplating both interim downswings and the major downtrend in the long term, prolonged range-bounded major trend remains intact.

Trade tips: At spot reference: 108.433 levels (while articulating), contemplating above technical rationale, it is wise to deploy tunnel spread options strategy using upper strikes at 108.629 and lower strikes at 107.650 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 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.