FxWirePro: NZD/USD shooting star and triple top patterns plummet prices below DMAs and EMAs – Trade tunnel spreads and short hedge

Shooting star pops-up at the peaks of NZDUSD rallies at 0.6755 levels, the stiff resistance levels are observed at 0.6785 and 0.6580. Consequently, the failure swings are observed and plummeted prices below DMAs. 

For now, more slumps appear to be likely upon the intensified bearish momentum and the bearish DMA & MACD crossovers (refer daily chart).

On a broader perspective, bulls have tested up-trendline support and bounce above 7EMAs.

But, can it be a bullish reversal in the major terms is still dubious. While bears likely to extend further on triple top formation. Although interim rallies seem to be on cards in the short run, momentum oscillators are not backing up these abrupt rallies. The intensified buying momentum is signaled by both leading oscillators on this timeframe as well. 

RSI and Stochastic curves show downward convergence to the prevailing price slumps signal the strength and the intensified bearish momentum.

Observe steep slumps below EMAs on breach below the neckline on this timeframe, this reminds us of 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: 0.6545 levels, we advocate executing tunnel spread options strategy with upper strikes at 0.6565 and lower strikes at 0.6490 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 0.64 levels, shorting futures of mid-month tenors have been advocated ahead of RBNZ monetary policy 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.