FxWirePro: NZD/JPY bears halt after breach wedge support – Trade tunnel spread and short hedge as indicators signal downtrend to prolong

Majority of the Kiwis currency pairs are attempting to show some mild rallies on the back of RBNZ monetary policy that cuts 50 bps.

So is the case with NZDJPY as well. Streaks of bearish patterns pop-up in the minor trend that plummets prices way below DMAs. Back-to-back gravestone dojis and shooting stars (refer oval-shaped areas on the daily chart), so, never get bull-trapped by the momentary upswings.

While leading and lagging indicators are indicating weakness. Both RSI and fast stochastic curves show downward convergence to the prevailing price slumps to indicate the intensified selling momentum. Bearish MACD & DMA crossovers are also substantiating that bearish trend to prolong further.

On a broader perspective, to substantiate the above standpoint, the major downtrend slides through the falling wedge (refer monthly chart).

The bearish engulfing has occurred at 73.545 levels that intensifies major downtrend below EMAs, this bearish pattern nudges price below EMAs. 

For now, more slumps on cards as both lagging indicators signal bearish trend continuation & RSI indicated faded strength at 56 levels and shows downward convergence thereafter.

Hence, we have already advocated maintaining shorts in the mid-month futures with a view of arresting the downside risks. As RBNZ has cut OCR rates by 50 bps in its monetary policy as widely anticipated, we could foresee more slumps on the cards. We wish to uphold the same short hedge strategy of mid-month tenor that was advocated in our previous post. 

Alternatively, one can also buy tunnel options spreads with upper strikes at 68.700 and lower strikes at 67.617 levels on the intraday trading grounds.