FxWirePro: NZD/USD interim uptrend halts on streaks of bearish patterns – Trading & hedging setup ahead of RBNZ

NZDUSD seems edgy now below 0.6618, ever since the bulls managed to breakout 0.6183 (100-DMAs) rallies have been impressive in the recent past. But for now, the pair has breached below 7, 21 &100-DMAs overnight, attempting to hold though, exhaustive bulls are restrained below 0.6618 levels (refer daily chart).

Flurry of bearish pattern candles pop-up, shooting star at 0.6661, hanging man at 0.6698 & engulfing candle at 0.6595 levels, these bearish patterns cap minor uptrend, while bears are most likely to drag upon breach below DMAs as both leading oscillators are also bearish bias.

On a broader perspective, bears attempting to nudge below EMAs upon gravestone doji (0.6625 levels) (refer weekly plotting), the major downtrend still remains intact below stiff resistance of 0.6787 areas, both leading oscillators (RSI & Stochastic curves) signal overbought pressures on this timeframe.

Trade tips: At spot reference: 0.6607 levels (while articulating), contemplating above technical rationale, it is wise to deploy tunnel spread options strategy using upper strikes at 0.6630 and lower strikes at 0.6535 levels. The strategy is likely to fetch exponential yields than the spot moves as long as the underlying FX keeps dipping but remains above lower strikes on expiration.

Alternatively, ahead of RBNZ’s monetary policy that is scheduled for this week, shorting NZDUSD futures contracts of mid-month tenors have been advocated, on hedging grounds, we now like to uphold the same positions as the underlying spot FX likely to target southwards up to 0.64 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.