FxWirePro: AUD/USD Interim Bulls Exhausted On Gravestone Doji But 7-DMA Cushions – Trade & Hedging Setup

AUDUSD has prolonged its minor uptrend, the last week’s rallies are extended upto 0.7183 levels after it has managed to break above crucial resistance zones, 0.6762 & 0.7050 levels, supported by improving global sentiment.

Upswings above 7, 21 & 100-DMA with bullish crossovers, the minor uptrend is intensified. But for now, bulls seem to be exhausted upon gravestone doji at 0.7137 level coupled with the overbought pressures & failure swings below 0.7050 levels might resume minor downtrend.

While both leading oscillators are approaching the overbought zone and to show selling pressures (refer daily chart).

On a broader perspective, although interim bulls are extending further upon hammer pattern but restrained at 100-EMAs (refer monthly chart), bears are most likely to drag price slumps upon breakdown below double top neckline. The major downtrend remains intact as long as it restrains below double top neckline and 100EMAs.

While both leading & lagging indicators indecisive but seemingly bullish bias.

The revival in global equities to early March levels has driven the Aussie to 0.66, our end-2020 target. Aggressive central bank policy settings should help ensure A$ does not return to the sub-0.60 trade of late March, but in coming weeks the reality of a tepid global recovery in H2’20 and woeful earnings reports are likely to chip away at risk sentiment.

Trade tips: On trading perspective, at spot reference: 0.7128 level, contemplating above technical rationale, at this juncture, it is advisable to execute boundary options strategy with upper strikes at 0.7185 and lower strikes at 0.7050 levels, thereby, one can fetch certain yields as long as the underlying spot FX remains between these two 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 0.69 levels in the medium run (spot reference: 0.7128 levels). Writers in a futures contract are expected to maintain margins in order to open and maintain a short futures position.