Can EUR/AUD bullish engulfing and hammer candles counter streaks of bearish patterns? Trade ITM call and deploy directional hedge

Technical Chart and Candlestick Patterns: Please be noted that EURAUD slumps below 7 & 21-DMAs on the back-to-back shooting star and hanging man patterns at peaks of rallies (at 1.6259, 1.6189 and 1.6261 levels.

But, from last 1-week or so, bulls attempt to counter the above-stated bearish patterns, Hammer on daily and bullish engulfing on monthly have occurred at 1.5851 and at 1.6250 levels respectively.

For now, we could foresee stiff resistance at 1.5537 levels (i.e. 7-DMAs) in the minor trend, while the current price is lingering at the strong support of 1.5466 after RBA’s monetary policy which has maintained status quo to keep its key rates at 1.50%.

Back-to-back shooting stars & hanging man pop-up at peaks coupled with the overbought signal by leading oscillators, major trend goes in range but slightly bearish bias (refer monthly chart).

Overall, amid interim rallies, the major trend is now stuck in a range with lingering bearish biasness. Hence, upswing seems unlikely to prolong as both leading and lagging indicators are not in conformity to the prevailing bullish rallies (refer monthly chart).

Momentum analysis: Both RSI and stochastic curves show upward convergence to the prevailing rallies that indicate the intensified bullish momentum on daily plotting, but vice versa on monthly terms.

Trend study: MACD, DMA, and EMAs have shown bullish crossovers indecisively, this indicates upswings may prolong further in short run but remains wedged in the long-run. 

Trade tips: On trading perspective, at spot reference: 1.6022 levels, capitalizing ongoing upswings, we advocate (1%) ITM call options strategy with upper strikes at 1.6157 levels, the strategy is likely to fetch leveraged yields as long as underlying spot FX keeps spiking on the expiration.

Alternatively, we advocate initiating longs in EURCAD futures contracts of Feb’19 delivery as further upside risks are foreseen and simultaneously, shorts in futures of April’19 delivery. Thereby, one can directionally position in their FX exposures. The directional implementation of the same trading theme by further allow for a correlation-induced discount in the options trading also if you choose strikes appropriately.

Currency Strength Index:FxWirePro's hourly AUD spot index is inching towards -49 levels which is bearish), while hourly EUR spot index was at -98 (bearish), while articulating (at 08:11 GMT).

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