FxWirePro: AUD/USD minor downtrend slides through sloping channel, double top extends major downtrend – Trade one touch put and short hedge

Technical chart and candlestick patterns: AUDUSD has been sliding through the sloping channel in the minor trend (refer daily chart). The pair has been attempting to test channel support and bounce back but restrained below 21-DMAs as a result, interim upswings appear to be exhausted for now.

More slumps likely only breach below channel support as both leading and lagging indicators signal mild bearish strength, otherwise, the interim bounce back possible though the current price way below 21DMAs. 

On a broader perspective, the double top formation with the breach below neckline has been extending the major downtrend of this pair and hit 10-year lows at 0.6675 areas (refer monthly plotting), bearish engulfing candles followed by shooting star patterns plummet prices well below 7EMA again on this timeframe. Every attempt of upswings is restrained below 21-EMA levels.

Both RSI and stochastic curves have signaled the selling momentum as these leading oscillators show downward convergence to the prevailing price slumps.

While bearish MACD and EMA crossovers substantiate the bearish sentiments and indicate downtrend to prolong further.

Trade tips: On trading perspective, at spot reference: 0.6712 levels, contemplating above technical rationale, it is advisable to execute one-touch put options with lower strikes at 0.6677 levels, thereby, one can achieve certain yields as long as the underlying spot FX keeps dipping.

Alternatively, on hedging grounds, we advocate shorting futures contracts of mid-month tenors 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.