FxWirePro: USD/JPY Fails At Wedge Resistance And 100-EMAs – Trading And Hedging Setup

USDJPY forms back-to-back hanging man, long-legged doji and shooting star candles at the stiff resistance of 109.723 levels, the bearish patterns nudge the current trend towards DMAs with overbought sentiments as both leading oscillators signal the intensified weakness. The bearish streaks from the highs of 109.727 levels seem to have halted at 108.427 levels (refer daily chart).

The vulnerable bulls are struggling to get momentum, though they attempted to bounce back, we could observe failure swings at the rising wedge resistance and the stiff resistance zone of 109.723 levels. 

Thereby, the interim rallies now appear to be absolutely exhausted, the prevailing price dips could drag further up to the next strong support at 109.140 or even up to 108.421 levels. 

On a broader perspective, the major downtrend still remains intact on a bearish engulfing pattern with big real body (refer monthly plotting), but the major trend is now stuck in the tight range, while the intermediate consolidation phase is capped at 100EMAs.

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

Trade tips: At spot reference: 109.400 levels (while articulating), contemplating above technical rationale, it is wise to deploy tunnel spread options strategy using upper strikes at 109.519 and lower strikes at 109.140 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 on the eve of Chirstmas and New Year 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.