Technical chart and candlestick patterns: In AUDUSD minor trend, back-to-back shooting star , gravestone doji and hanging man patterns are traced out at 0.7182, 0.7182, and 0.7188 levels respectively, these bearish candles patterns are followed by 3-black crow patterns finished at 0.7133 levels (refer daily plotting). All these bearish patterns have hampered previous upswings and plummeted the prices below DMAs. The current trend now seems to be edgy despite the mild rallies for the day on the above-stated bearish formations.
The momentary bullish attempts to bounce back but restrained below 7DMAs as the ongoing rallies are not in conformity to the any of the technical indicators, the failure swings are most likely to resume downtrend upon the bearish DMA & MACD crossovers.
While both leading oscillators ( RSI & Stochastic curves) show downward convergence with the price dips that signal intensified bearish momentum.
AUDUSD on a broader perspective: Last month, the hammer pattern has occurred at 0.7270 levels. The major trend has been extending double top formation with a breach below the neckline and may head towards 1 and a half year lows (refer monthly plotting), bearish engulfing candle followed by shooting star patterns plummet prices well below 7EMA again on this timeframe.
Both RSI and stochastic curves have constantly been showing downward convergence on this timeframe as well to signal bearish momentum. While we see bearish EMA and MACD crossovers with rising volumes with dipping prices, this indicates downtrend to prolong further.
Trade tips: On trading perspective, at spot reference: 0.7142 levels, capitalizing abrupt upswings, it is advisable to execute tunnel spread strategy with upper striking options at 0.7160 and lower short lower strikes at 0.7125 levels, the strategy is likely to fetch leveraged yields as long as underlying spot FX keeps dipping but remains well above lower strikes on the expiration.
Alternatively, on hedging grounds, we advocate shorting futures contracts of mid-month tenors as the underlying spot FX likely to target southwards below 0.70 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.
Currency strength index: FxWirePro's hourly AUD spot index is inching towards -135 levels which is bearish ), while hourly USD spot index was at -24 ( bearish ), while articulating (at 06:14 GMT ).
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