FxWirePro: NZD/USD bearish engulfing extends triple top pattern – Trade tunnel spreads and short hedge

Bearish engulfing and shooting star pop-up at the peaks of NZDUSD rallies at 0.6873 and 0.6632 levels respectively. Consequently, the failure swings are observed and plummeted prices below DMAs. 

For now, more slumps appear to be likely upon the intensified bearish momentum as both leading oscillators (RSI & Stochastics) show downward convergence and the bearish DMA & MACD crossovers (refer weekly chart).

On a broader perspective, the major trend has breached up-trendline support and slid below 7-EMAs (refer monthly chart).

While bears likely to extend further on the triple top formation. The momentum oscillators are backing up further downtrend. The intensified selling momentum is signaled by both leading oscillators on this timeframe as well. 

Observe steep slumps below EMAs on breach below the neckline on this timeframe, this reminds us the major downtrend as both leading and lagging indicators are still bearish bias in the major trend.

Trading tips: Contemplating above technical rationale, on intraday trading grounds, at spot reference: 0.6333 levels, we advocate executing tunnel spread options strategy with upper strikes at 0.6366 and lower strikes at 0.6236 levels, the strategy is likely to fetch leveraged yields as long as the underlying price keeps sliding towards lower strikes on the expiration.

Alternatively, we foresee major downtrend continuation up to 0.6286 levels, shorting futures of mid-month tenors have been advocated with an objective of arresting further potential slumps, we wish to uphold the same positions. Writers in a futures contract are expected to maintain margins in order to open and maintain a short futures position.