FxWirePro: Massive volumes substantiate NZD/JPY’s spinning top and long legged doji - Stay short digital put as bets on RBNZ OCR cut intensify

The pair rallied from 72.347 to 73.321 levels, that's where it has struggled to hold onto bullish momentum and appeared shooting star pattern candle.  Bears have again been active to push back southwards below 7DMA for now (see 4H chart).

Stay short upon break below support at 73.005 & 7DMA.

While RSI and stochastic oscillators have been consistently converging downwards to the price dips on both intraday as well as monthly graphs, subsequently, MACD on monthly signals bearish trend to prolong ahead.

On monthly charts, the price declines consistently below EMAs and more slumps likely as spinning top and doji appear with huge volumes.

21EMA crosses over 7EMA that signals downtrend continuation.

Most importantly, the massive volumes on declining streaks are inn conformity to the strong downtrend.

Hence, if it does not manage to hold onto 72.7925 level on a closing basis then we could foresee serious dips upto the next support only at 72.500 levels and bears may even drag upto 71.115 levels again.

Trade tips: Option Tunnel Spread

Spot ref: 72.962, NZDJPY IVs are more than 15% (while articulating) as the RBNZ precisely mentioned last month that it would be returning to the easing table, and like the consensus, we expect a 25bp OCR cut to 2.0% in tomorrow’s monetary policy.

We wouldn't be surprised even if it hits 72.7925 levels shortly. On intraday terms, we rely on bearish signals by technical indicators, so smart way to approach these types of bearish swings 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 -0.75 delta put below the current exchange rate less an Out-Of-The-Money put above the exchange rate. The delta of -0.55 on combined position with slightly negative theta is preferred on this execution.