FxWirePro: NZD/JPY to break crucial support 75.922, more bearish space upto 74.500 - speculate via option tunnel

The pair rallied from 74.623 to 76.458, that's where it has struggled to hold onto the minor resistance.  Bears have again been active to push back southwards at that level.

It has broken supports at 75.922 levels on intraday basis, you can observe how the price behaviour of this pair on either side after breaching this level in the recent historical evidences (see circled areas). So, 75.922 would determine the next short term direction, breakout on either side would be closely watched.

On monthly chart, even though prices have slightly jumped above 74.478 it has remained well below above mentioned resistance (75.922).

The current prices on monthly remained well below 7&21EMAs.

21EMA crosses over 7EMA that signals downtrend continuation.

MACD signals bearish trend to prolong ahead.

Massive volumes on declining streak is conformity to the strong downtrend.

The leading oscillators have been converging downwards below 43 levels, subsequently, stochastic curves have reached oversold territory but there is signs of bullish crossover.

Hence, if it does not manage to hold onto 75.922 level on a closing basis we could foresee dips upto the next support only at 75.058 levels and bears may even drag upto 74.500 levels again.

Trade tips: Option Tunnel Spread

Spot ref: 76.280, NZDJPY IVs are at 14.39% (while articulating).

We wouldn't be surprised even if it hits 75 levels shortly or 76.458 on north  in intraday terms.

But for intraday terms, we rely on bearish signals by technical indicators, so smart way to approach these type of 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.