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GBP/JPY Chartpack - Technicals & Trade Setup | January 31, 2019

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The January month’s  GBPJPY  upswings now seem to have been absolutely halted and going back again under the control of bears upon the streaks of bearish patterns. Last week, the pair has shown slumps about 1.20% so far. While the current month shows rallies up to 2.20%.

Before we pitch-in to the long-term analysis, just quickly glance through our previous write-up on this pair, where we advocated short hedges. Refer below weblink for more reading:

Had you initiated those positions, you would have arrested the recent bearish swings and kept on risk on the check.

Technical analysis (chart and candlestick patterns occurred): On daily plotting, ever since the formation of back-to-back shooting star and gravestone doji candles at 144.568 and 144.400 levels respectively, bearish engulfing at 143.687 levels on the 4H chart and at 146.754 levels on monthly terms, the bears have managed to hamper the previous bullish swings.

Selling sentiments have continued further price dips below 7SMAs.

To substantiate this bearish outlook, SMA and MACD crossovers coupled with the above-stated candlesticks signal further weakness. While both RSI and stochastic curves show downward convergence to the prevailing price dips that indicate the intensified bearish momentum.

On a broader perspective, the major downtrend that went in the consolidation phase has now continued bearish streaks again (refer monthly plotting), where the engulfing pattern has occurred at 146.754 and rail-road pattern at 144.165 levels on monthly terms to nudge prices below EMAs.

The major downtrend retraces 78.6% Fibonacci levels upon engulfing & rail-road patterns, hammer most likely to occur at 142.721 levels. Bulls counter on the most likely hammer , both momentum indicators in line with the price dips. As a result, today’s trend has been attempting to slide further below 7SMAs.

Trade tips: at spot reference: 142.728 levels, one can now still uphold shorts in futures contracts of mid-month tenors with a view to arresting further potential downside risks. Writers in a futures contract are expected to maintain margins in order to open and maintain a short futures position.

Alternatively, on daily trading grounds, we advocate constructing tunnel spread, using upper strikes at 143.0079 and lower strikes at 142.257 levels. The strategy is likely to fetch leveraged yields as long as the underlying price keeps dipping but remains above lower strikes on the expiration.

Currency Strength Index: FxWirePro's hourly GBP spot index is flashing -95 (which is bearish ), while hourly JPY spot index was at 47 (neutral) while articulating (at 06:17 GMT ).

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