FxWirePro: EUR/AUD Minor Downtrend Slides Below 100-DMAs, Shooting Star Counters Major Uptrend – Trading & Hedging Setup

Of late, EURAUD has been constantly dipping upon flurry of bearish pattern candles at the peaks.

Spinning top, Shooting star, and Hanging man patterns have occurred at 1.8608, 1.8412 and 1.8258 levels respectively (refer daily chart).

Consequently, the minor trend resumes its bearish business by nudging price below DMAs.

For now, the failure swings at pivot point (1.6595 levels) with intensified bearish momentum is most likely to prolong minor downtrend. The current prices have slid below 7, 21 & 100-DMAs, while all technical indicators bearish bias, more slumps likely upon bearish MACD crossover.

On a broader perspective, Overbought & selling pressures in the major trend has now signalled by the leading oscillators, as a result, bears fall back in range upon shooting star pattern (refer monthly chart).

RSI shows faded strength to plummet prices below 7-EMAs, while stochastic curves indicate overbought momentum.

Trade tips: On trading perspective, at spot reference: 1.6565 levels, contemplating above technical rationale, we advocate tunnel options spreads using upper strikes at 1.6788 (7-DMA) and lower strikes at 1.6318 levels, the strategy is likely to fetch leveraged yields as long as underlying spot FX keeps sliding but remain above lower strike on the expiration.

Alternatively, we recommend directional hedges that comprised of shorts in EURAUD futures contracts of May’20 deliveries, simultaneously, longs in futures of June’20 delivery. The short leg is likely to hedge further potential slumps in the ongoing minor trend and the upside risks would be arrested by the long leg. Thereby, one could be able to directionally position in their FX exposures on hedging grounds. This strategy is considered ahead of both ECB and RBA that are lined up for their monetary policy meetings.