FxWirePro: AUD/USD shooting star at channel resistance more imminent for lingering bears, major downtrend drags double top formation

Although AUDUSD attempted to bounce back in the last weekend, failure swings were at 7DMAs. Consequently, bears have resumed today. While minor trend slides through sloping channel.

Sharp shooting star has occurred at 0.7256 levels which is exactly at channel resistance (refer daily plotting).

As a result, the current prices are still below 7DMA levels. For now, more slumps likely below 21DMAs upon above-stated shooting star formation.

The stiff resistance at 0.7240 levels and steep slumps were observed. The trend seems to be slightly edgy as both leading indicators signal overbought momentum (both RSI and stochastic curves show downward convergence).

AUDUSD in medium term perspective: While the major trend has been extending double top formation with breach below neckline and head towards 1 and a half year lows (refer monthly plotting), bearish engulfing candle followed by shooting star patterns plummet prices well below 7EMA again on this timeframe. 

Both RSI and stochastic curves have constantly been showing downward convergence on this timeframe as well to signal bearish momentum. While we see bearish EMA and MACD crossovers with rising volumes with dipping prices, this indicates downtrend to prolong further.

As a result, if you are foreseeing more bearish potential amid continued consolidation around 0.7200 as the RBA continued dovish stance in its monetary policy decision last week. Thus, any abrupt rallies should not be deemed as long opportunities. 

Trade tips: On trading perspective, at spot reference: 0.7215 levels, capitalizing upswings, it is advisable to execute tunnel spread strategy with upper striking options at 0.7250 and lower short lower strikes at 0.7175 levels, the strategy is likely to fetch leveraged yields as long as underlying spot FX keeps dipping but remains well above lower strikes on the expiration.

Alternatively, on hedging grounds, we advocate shorting futures contracts of mid-month tenors as the underlying spot FX likely to target southwards below 0.70 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.

Currency Strength Index: FxWirePro's hourly AUD spot index is inching towards 47 levels which is bullish), while hourly USD spot index was at 98 (bullish), while articulating (at 07:43 GMT). For more details on the index, please refer below weblink:

http://www.fxwirepro.com/currencyindex