FxWirePro: NZD/USD Shooting Star Coupled With Triangle Support Breakdown and Triple Top Patterns Indicates Renewed Weakness

NZDUSD tumbled almost 125 bps as shooting star pop-up at the peaks of rallies at the stiff resistance of 0.6437 & 0.65 levels. 

For now, more slumps appear to be likely event as the current price is attempting to nudge below 21-DMAs upon the intensified bearish momentum.

Both leading oscillators (RSI & Stochastics) show downward convergence to indicate the faded strength and intensified selling momentum (refer daily chart).

On a broader perspective, the major trend has breached down triangle support and slid below 7-EMAs (refer monthly chart). As a result, the prices sank from the peaks of 0.6305 to the recent lows of 0.6203 which is the lowest level since 2015. 

RSI oscillator, on this timeframe, shows faded strength at 57 levels, downward convergence to the prevailing downtrend and forms lower lows.

As a result, bears appear to be extending further on the triple top formation. The momentum oscillators are backing up further downtrend. The intensified selling momentum is signalled by both leading oscillators (although stochastic is slightly indecisive) on this timeframe as well. 

Observe steep slumps below EMAs on breach below neckline on this timeframe, this reminds us the major downtrend as trend indicators (MACD & 100EMAs) are still bearish bias in the major trend.

Trading tips: USD appeared weaker as the Fed delivered on its so-called hawkish cut yesterday: a rate cut by 25bp to keep funds rate at 1.75%, two FOMC members voted against the step and there was one dove (James Bullard) who was content with 25bp rather than 50.

Contemplating above technical rationale, at spot reference: 0.6363 levels, as we foresee major downtrend continuation up to 0.6050 levels amid mild buying sentiments, shorting futures of mid-month tenors have been advocated in our directional hedging strategy ahead of RBNZ with an objective of arresting puzzling swings.

As stated in our previous write-up, bulls have shown their effects upon the formations of dragonfly dojis. 

The interim rallies are foreseen to be extended maximum up to 0.6437-50 levels in short run, we advocate initiating longs in NZDUSD futures contracts of November’19 delivery as further upside risks are foreseen and simultaneously, shorts in futures of December’19 delivery are the most important for the major downtrend.

Thereby, one can directionally position in their FX exposures. The directional implementation of the same trading theme by further allow for a correlation-induced discount in the options trading also if you choose strikes appropriately.