FxWirePro: AUD/USD Chartpack – Technicals, Trading & Hedging Setup

AUDUSD short-term trend: It retains downside momentum, 0.5960 vulnerable today. The pair shows no traces of recovery at this juncture after deep slumps below DMAs upon hanging man and gravestone doji pattern candles, while both leading and lagging indicators are in tandem with prevailing downtrend.

The medium term perspectives: 7 & 21-EMAs cap any attempts of upswings, while bears drag price slumps on the breakdown below double top neckline (refer monthly chart). 

Both RSI & stochastic curves show downward convergence to the current downswings to indicate the intensified selling momentum. To substantiate this bearish stance, bearish DMA & MACD crossovers indicate the downswings to prolong further.

As a result, the major downtrend remains intact as both leading & lagging indicators are bearish bias on this timeframe as well.

The Aussie dollar, as a proxy for the global risk sentiment, and also for China’s growth outlook, will continue to remain under downward pressure. The next major technical support level is 0.5800 (2002 peak). 

Trade tips: On trading perspective, contemplating above technical rationale, at this juncture, it is advisable to execute tunnel options strategy with upper strikes at 0.6030 and lower strikes at 0.59 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 wish to uphold the same strategy as the underlying spot FX likely to target southwards below 0.58 levels in the medium run (spot reference: 0.5992 levels). Writers in a futures contract are expected to maintain margins in order to open and maintain a short futures position.