FxWirePro: AUD/USD streaks of bearish candles develop descending channel and double top patterns – Uphold hedging setup ahead of RBA

Technical chart and candlestick patterns: Please be noted we have already emphasized in our recent post that AUDUSD minor trend has been sliding through the sloping channel (refer daily chart). The pair is responding to our whims and fancies, it has tested channel support and bounced back but restrained below stiff resistance of 0.6865 levels. 

Back-to-back bearish candles have been traced out, such as, shooting star, gravestone doji and hanging man patterns have occurred at this juncture (refer circular area). 

As a result, the steep slumps below DMAs have been observed as rightly predicted. 

For now, as both leading oscillators (RSI & Stochastic curves) still show downward convergence to the prevailing price slumps that signal selling pressures, thus, more slumps likely up to next strong support zone at 0.6735 level, any breach below these levels might expose renewed bearish pressures upon bearish DMA and MACD crossovers that indicate downswings to prolong further. 

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), in the recent past, bearish engulfing candles followed by shooting star patterns plummet prices well below 7EMA again on this timeframe. 

Bullish engulfing pattern attempts to bounce back but 21-EMA caps upswings, every attempt of upswings are restrained below 21-EMA levels. The major downtrend remains intact as both lagging indicators bearish bias.

Trade tips: On trading perspective, at spot reference: 0.6752 levels, bidding above bearish technical rationale, it is advisable to execute tunnel spread options strategy with upper strikes at 0.6780 and lower strikes at 0.6705 levels, thereby, one can fetch certain yields as long as the underlying spot FX keeps dipping but remains above lower strikes on the expiration.

Alternatively, on hedging grounds ahead of RBA’s monetary policy that is scheduled for the next week, we advocate shorting futures contracts of mid-month tenors as the underlying spot FX likely to target southwards below 0.66 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.