FxWirePro: NZD/USD Interim Uptrend Capped By 100-DMAs, Major Downtrend Intact Upon Triple Top – Trade & Hedging Setup

NZDUSD broke higher overnight, targeting next stiff resistance of 0.6265 and 0.6452 levels. Interim upswings jump above DMAs, but 100-DMA caps the prevailing minor uptrend (refer daily chart).

Bears are most likely to resume upon overbought pressures, while both leading & lagging indicators are in line with the upswings but signal overbought sentiments & faded strength.

On the contrary, jump above this level (100-DMA) will extend rallies up to the next stiff resistance but major downtrend intact.

The medium-term perspectives: Bears nudge below 21-EMAs & bulls restrained at pivot point, major downtrend to resume upon triple top pattern, both leading & lagging oscillators are in tandem with the downswings (refer monthly chart).

The pair remains at the mercy of global risk sentiment near term, with potential for gains to 0.6400 during the next few weeks. Further out, though, economic data releases over the next few months will be dire, potentially denting sentiment further. There’s potential to revisit 0.5900 during the next few months.

Trade tips: At spot reference: 0.6187 levels (while articulating), contemplating above technical rationale, it is wise to deploy tunnel spread options strategy using upper strikes at 0.6228 and lower strikes at 0.6130 levels. The strategy is likely to fetch exponential yields than the spot moves as long as the underlying FX keeps dipping but remains above lower strikes on expiration.

Alternatively, shorting NZDUSD futures contracts of mid-month tenors have been advocated, on hedging grounds, we now like to uphold the same positions as the underlying spot FX likely to target southwards up to 0.5850 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.