FxWirePro: AUD/USD Bears Back In Sloping Channel, Uphold Short Hedges As Most Likely Engulfing Pattern Intensifies Major Downtrend

Technical chart and candlestick patterns: AUDUSD short-term trend travels in a descending channel (refer daily chart). Although the interim bulls have shrugged-off and broken-out the channel resistance successful.We traced shooting stars and doji patterns in our recent post to signal weakness again, accordingly, we had raised our dubious eyes on the sustenance. 

The minor trend is back in channel, as stated before, the pair has now shown the exhaustiveness in the interim upswings, as a result, prices are plunged back. 

For now, more price dips are on the cards as both leading oscillators (daily RSI & Stochastic curves) show the downward convergence to the prevailing downtrend signal the intensified bearish momentum.

On a broader perspective, the double top formation with the breach below neckline has been extending the major downtrend of this pair and hit multi-years lows at 0.6670 areas (refer monthly plotting), we have most likely bearish engulfing candle for this month to drag the major downtrend below 7EMA. 

Trade tips: On trading perspective, at spot reference: 0.67 levels, contemplating above technical rationale, it is advisable to execute tunnel options strategy with upper strikes at 0.6721 and lower strikes at 0.6668 levels, thereby, one can fetch certain yields as long as the underlying spot FX keeps dipping but remain above lower strikes on the expiration.

Alternatively, on hedging grounds we advocated shorting futures contracts of mid-month tenors, we uphold the same strategy as the underlying spot FX likely to target southwards below 0.65 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.