FxWirePro: AUD/JPY bears in major trend drift through sloping channel, watch out for rallies for fresh short build up –Tunnel spreads for intraday swings

AUDJPY has broken below supports at 76.749 levels with a spinning top formation, currently, the bears have again snapped the recent gains at the same resistance levels.

To understand the major downtrend, last month, during the convincing rallies of AUDJPY bears pulled back at 77.506 mark (strong resistance at 79.549 levels) but held firmly another important support at 76.184 levels on monthly charts, so thereby bull rallies began on 1st Jan seeing weakness back again to signify long term bear trend's momentum.

More room for shorts after breach below 79.547, wait for more rallies for fresh short build up.

You can figure out from both daily as well as monthly plottings, the current prices have consistently remained well below DMAs and EMAs. Consequently, every attempt of recovery has been showing weakness at these MA curves which would be deemed as the strong supply zones.

However, leading oscillators on both daily and monthly charts, showing clear convergence with the prevailing slumps; we believe this as bears are getting a boost again. RSI is currently trending below 36 that have evidenced the momentum in declining sentiments.

In addition to that, stochastic curves boiling up selling even below 20 level which is oversold territory but there is no clear bullish crossover. Thus, the major trend has been bias towards the south and watch out for every rally as a fresh shorting opportunity.

Trade tips: Option Tunnel Spread

No wonder even if it hits 76 levels near term or retest of 76.749 on the north in intraday terms.

Well, on intraday terms, smart way to approach this pair is to deploy the option tunnel using ATM puts is structured as a binary version of a conventional put spread, i.e. long delta puts with higher strikes while writing the lower strikes for above-mentioned targets on either side.

Therefore an In-The-Money tunnel would be formed of an In-the-money -0.74 delta put below the current exchange rate less an Out-Of-The-Money put above the exchange rate. The delta of -0.54 on combined position with slightly negative theta is preferred on this execution.