FxWirePro: AUD/NZD shooting star encourage bears in short-term trend, but major trend still consolidation phase – Tunnel spreads for trading and short hedge

After streaks of downswings in AUDNZD from last four consecutive days, we see a slight bounce today.

While the major trend hovers at sloping channel resistance, minor trend slides below DMAs but tests strong support zone at 1.0810 and 1.0850.

On daily terms, the stiff resistance is rejected at 1.1142 levels. Shooting star pattern candles have occurred at 1.0983, 1.0999, 1.0986, 1.0968 and 1.0946 levels respectively.

These back-to-back shooting stars & other bearish patterns coupled with both leading oscillators signal weakness.

For now, the current prices remain still well below 7DMA curve despite the today’s sharp spikes, but we foresee more dips on cards as the momentum is still not convincing.

RSI and stochastic curves that indicate strength and momentum in the downtrend that’s been consistently converging downwards to the price dips.

We’ve already stated in our previous write up, that the series of bearish pattern candlesticks, such as Shooting stars, hanging man & the bearish engulfing candles have occurred at 1.1083, 1.1054, 1.1126, and 1.0921 levels respectively. As a result, it is evident that these bearish patterns evidence considerable slumps.

On the flips side, the major trend has been sliding back in the sloping channel (refer monthly charts), the current prices spike above EMAs but attempt to slide back in the sloping channel.

It has tested strong support at 1.0809 levels for this month, clear substantiation is observed from both leading oscillators, RSI and stochastic curves have constantly been converging upwards to the upswings.

Overall, the resumption of the major downtrend is on the table, even if you any abrupt upswings, that shouldn’t be deemed as panicky sentiment.

Thus, contemplating above technical rationale, on speculative grounds we advocate tunnel spreads using upper strikes at 1.0979 and lower strikes at 1.0920 levels.

The trading between these strikes likely to derive certain yields and more importantly these yields are exponential from spot movements.

Alternatively, with a view to arresting downside risks, foreign traders are advised to initiate shorts in futures contracts of mid-month tenors.

Currency Strength Index: FxWirePro's hourly AUD spot index is flashing at 54 levels (which is bullish), while hourly NZD spot index was at shy above 83 (which is bullish) while articulating. For more details on the index, please refer below weblink:

http://www.fxwirepro.com/currencyindex.

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