USD/JPY short setup as hammer at channel support vulnerable | December 20, 2018

A Glance at Technical Analysis: USDJPY minor trend, so far, was spiking through rising channel , the pair has formed hammer at 112.473 levels (i.e. exactly at channel support).

Consequently, bears have managed to breach below channel baseline, for now, As a result, the current prices are nudged below 7DMA, further slumps seem to be most likely as both leading oscillators ( RSI & stochastic curves) show downward convergence that indicate overbought pressures.

On the flipside, bulls, in the broader perspective, now, seem to be absolutely exhausted at 61.8% Fibonacci levels from the lows of June 2016, (refer monthly plotting), the trend on this timeframe, is stuck in tight range.The major trend that has gone in the consolidation phase (refer rectangular area on monthly plotting for the range-bounded trend), now appears to be little edgy as the formation of hanging man candle at 112.942 levels signals weakness, while both momentum oscillators ( RSI & stochastic curves) indicates faded strength and overbought pressures, the trend indicators indecisive, we see bullish invalidation on retrace below.

Well, we see stiff resistance at 114.847 and strong supports at 111.302 levels (on monthly terms).

Trade Tips: Contemplating above technical rationale, it is wise to bid tunnel spreads with upper strikes at 112.168 and at 111.629 levels. The strategy is likely to fetch leveraged yields as long as the underlying spot FX keeps dipping but remains well above lower strikes on the expiration.

Currency Strength Index: FxWirePro's hourly USD spot index was at -53 (which is bearish ), while hourly JPY spot index was at 151 ( bullish ) at 06:33 GMT .