FxWirePro: NZD/USD breaks channel support, on verge of extending triple top formation as bears hit 4M lows – Trade tunnel spreads and short hedge

As you could refer daily plotting of NZDUSD, the bears extend again in the minor trend especially after the breaching strong support below the channel baseline and tumbled towards 4-months’ lows.

The failure swings at channel resistance, the occurrence of gravestone doji and shooting star patterns have plummeted the price with steep dips below DMAs. For now, more dips seem to be on cards upon bearish DMA and MACD crossovers & both leading oscillators substantiate the bearish momentum.

On weekly terms also you notice steep slumps after shooting star formation. It seems that the triple top formation is extending which is bearish in nature to signal weakness. As the steep slumps below EMAs are observed, while both leading and lagging oscillators also substantiate bearish interests on this timeframe, the triple top formation seems most likely.

Momentum study: Both leading oscillators (RSI & stochastic curves) have been showing downward convergence along with the ongoing price dips to signal bearish momentum on both daily and weekly terms, these indicators have been in bearish favor.

Trend study: While MACD’s coupled with 7 and 21 DMAs have also shown bearish crossovers that signaled downswings to prolong further.

Next strong support levels are observed at 0.6975-0.6950 areas.

In our earlier posts, we’ve advised short hedges using futures contracts of mid-month tenors with a view of arresting bearish risks, these short positions seem to have been instrumental in serving the purpose.

Overall, as the US dollar finally came to life in the recent past, bears are pushing NZDUSD below its 4-month lows. If it sustains the break below 0.7070 levels, then a further decline towards 0.69 is on the cards.

One trading grounds, one can construct tunnel spreads using upper strikes at 0.7055 and lower strikes at 0.6990 levels.

Currency Strength Index: FxWirePro's hourly NZD spot index is inching towards -128 levels (which is highly bearish). Hourly USD spot index was at shy above 120 (bullish) while articulating (at 06:19 GMT).

The above indications from these indices are also conducive for our strategy.

For more details on the index, please refer below weblink:

http://www.fxwirepro.com/currencyindex

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