FxWirePro: EUR/AUD bears develop long-lasting range – FX derivatives trade ideas

Technical Chart and Candlestick Patterns: Please be noted that EURAUD slumps below 7 & 21-DMAs on a back-to-back shooting star and spinning top patterns at stiff resistances of 1.6066 levels (to be precise at 1.6059 and 1.6058 levels respectively, refer 2H chart).

But for today, bulls attempt to counter the above-stated bearish patterns, however, bearish momentum is intensified.

For now, we could foresee the stiff resistance at 1.6037 levels (i.e. 7-DMAs) in the minor trend, while the prevailing bullish price sentiment is lingering at 1.6026 levels ahead of RBA’s monetary policy which is most likely to be status quo to keep its key rates at 1.50%.

On a broader perspective, back-to-back shooting stars pop-up at peaks coupled with the overbought signal by leading oscillators, while major trend goes in range but slightly bearish bias (refer monthly chart).

Overall, amid interim rallies, the major trend is now stuck in a range with lingering bearish biasness. Hence, upswing seems unlikely to prolong as both leading and lagging indicators are not in conformity to the prevailing bullish rallies (refer monthly chart).

Momentum analysis: Both RSI and stochastic curves show downward convergence to the downswings that indicate the intensified bearish momentum.

Trend study: MACD curve (on intraday plotting) has shown bearish crossovers decisively, this indicates downswings may prolong further in short run but remains wedged in the long-run as the leading indicator has been indecisive on monthly terms. 

Trade tips: On trading perspective, at spot reference: 1.6024 levels, contemplating above technical rationale, we advocate boundary options trades with upper strikes at 1.6037 and lower strikes at 1.6007 levels, the strategy is likely to fetch leveraged yields as long as underlying spot FX remains between these strikes on the expiration.

Alternatively, on hedging grounds, shorting futures of mid-month tenors are advocated with a view of arresting further potential slumps. 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 -62 levels (which is bearish), while hourly EUR spot index was at 22 (mildly bullish) while articulating (at 06:12 GMT).

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