FxWirePro: AUD/USD’s Hammer Pattern Intensifies Consolidation Phase As Interim Bulls Lingering With 2-Year’s Highs

AUD’s rally does not yet look stretched, although short-term potential looks to be imminent for 0.7500 levels.

Technically, the prevailing upswings jump above 7, 21 & 100-DMA levels with the stern bullish candle, while bulls seem to be shrugging-off shooting star and hits a fresh 2-year’s highs. For now, more rallies likely as both leading oscillators show upward convergence (refer daily chart).

On a broader perspective, the interim bulls, in the consolidation phase, extended upon hammer pattern at 0.6135 areas (monthly plotting). The current price, on this timeframe, spike above EMAs with bullish crossover.

Nevertheless, the major downtrend remains intact as long as bulls restrained below 100-EMA, both leading & lagging indicators bullish bias.

While the RBA does not favour negative rates, the weakening domestic economic outlook could raise expectations that the RBA might take other steps to loosen policy to support the labour market, where unemployment is still rising. Our end-Sep forecast is 0.75, extending through US election volatility in Nov to 0. 73 back again by year-end.

Trade tips: On trading perspective, at spot reference: 0.7407 level, contemplating above technical rationale and the current trend, it is advisable to execute one-touch call options strategy with upper strikes at 0.75 levels, thereby, one can participate in the prevailing uptrend and fetch leveraged yields as long as the underlying spot FX keeps spiking towards upper 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 0.7150 levels in the medium run cannot be disregarded. Writers in a futures contract are expected to maintain margins in order to open and maintain a short futures position.