FxWirePro: AUD/USD short setup on resumption of dips after RBA’s status quo despite hammer pattern signifies double top formation

RBA has maintained the status quo in its monetary policy, keeping cash rates at 1.50%. Consequently, Aussie has shown vigorous rallies up to 0.7264 levels.

In AUDUSD minor trend, shooting star has occurred at 0.7272, and 0.7268 levels, hanging man has occurred at 0.7262, these bearish patterns have plummeted prices below DMAs (refer daily plotting).

Despite the bullish engulfing patterns in previous trading sessions, the current trend now seems to be edgy on the above-stated bearish formations amid momentary bullish attempts to bounce back but ongoing rallies are not in conformity to the technical indicators, the failure swings are most likely to resume downtrend on the bearish DMA &MACD crossovers.

AUDUSD on a broader perspective: Last month, the hammer pattern has occurred at 0.7270 levels. The major trend has been extending double top formation with a breach below the neckline and may head towards 1 and a half year lows (refer monthly plotting), bearish engulfing candle followed by shooting star patterns plummet prices well below 7EMA again on this timeframe. 

Both RSI and stochastic curves have constantly been showing downward convergence on this timeframe as well to signal bearish momentum. While we see bearish EMA and MACD crossovers with rising volumes with dipping prices, this indicates downtrend to prolong further.

Trade tips: On trading perspective, at spot reference: 0.7249 levels, capitalizing abrupt upswings, it is advisable to execute tunnel spread strategy with upper striking options at 0.7262 and lower short lower strikes at 0.72 levels, the strategy is likely to fetch leveraged yields as long as underlying spot FX keeps dipping but remains well above lower strikes on the expiration.

Alternatively, on hedging grounds, we advocate shorting futures contracts of mid-month tenors as the underlying spot FX likely to target southwards below 0.70 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.

Currency Strength Index: FxWirePro's hourly AUD spot index is inching towards 111 levels which is bullish), while hourly USD spot index was at 46 (bullish) while articulating (at 08:20 GMT). 

For more details on the index, please refer below weblink: http://www.fxwirepro.com/currencyindex