FxWirePro: NZD/USD Plunges Below DMAs On Bearish Engulfing, Gravestone Doji Reminds Major Downtrend – Trading & Hedging Setup

NZDUSD bears are nudging prices below 0.66 levels as predicted in our recent posts, bearish engulfing candle pops-up at 0.6595 levels to plummet prices after sliding below DMAs with bearish crossovers. The bears managed to breakdown 0.6675 (which is range base) ever since then (refer daily chart).

Flurry of bearish pattern candles appeared at the peaks of rallies to signal weakness, such as, shooting star at 0.6661, hanging man at 0.6698 & engulfing candle at 0.6595 levels, these bearish patterns cap minor uptrend.

For now, the pair is trading at 0.6545 (while articulating), bears are most likely to drag upon breach below DMAs as both leading oscillators are also bearish bias.

On a broader perspective, bears attempting to nudge below EMAs upon gravestone doji (0.6625 levels) (refer weekly plotting), the major downtrend still remains intact below stiff resistance of 0.6787 areas, both leading oscillators (RSI & Stochastic curves) signal overbought pressures on this timeframe.

Trade tips: At spot reference: 0.6545 levels, contemplating above technical rationale, it is wise to deploy tunnel spread options strategy using upper strikes at 0.6575 and lower strikes at 0.6450 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, RBNZ maintained status-quo monetary policy today, 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 0.64 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.