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FxWIrePro: EUR/AUD’s breach of rising wedge support and display of shooting star at range resistance

Technical Chart and Candlestick Patterns: EURAUD was spiking through the rising wedge pattern so far in the minor trend. 

Although bulls attempt to testing wedge support several times in the recent past with hammer formations, but bears shrug-off these bullish patterns (refer daily plotting). Bears managed to breach below rising wedge support decisively, consequently, more slumps are foreseen for now, as the current price slide below SMAs with bearish SMA and MACD crossovers, while both the leading oscillators indicate the intensified selling momentum.

Both RSI and fast stochastic curves are showing downward convergence to indicate selling momentum on this timeframe. 

On a broader perspective, the major trend has been spiking through uptrend (refer monthly chart). But the overbought and selling pressures are intensified in the major trend signaled by both leading oscillators on this timeframe, bears fall back in range after back-to-back shooting star and hanging man patterns.

Overall, the recent months’ rallies now seem to be exhausted but the major trend is still stuck in the range with lingering bearish biasness. RSI shows bearish divergence coupled with overbought pressures signaled by stochastic curves.

Hence, previous upswing seems unlikely to prolong as both leading and lagging indicators are indicating the prevailing bearish sentiments (refer monthly chart).

Trade tips: On trading perspective, at spot reference: 1.6233 levels, contemplating above technical rationale, we advocate tunnel options spreads using upper strikes at 1.6250 and lower strikes at 1.6206 levels, the strategy is likely to fetch leveraged yields as long as underlying spot FX remains above lower strike on the expiration.

We advocated this strategy as European central bank is lined up for monetary policy meeting this week, following the ECB’s surprisingly dovish message in the recent past, we see significantly less upside for EURAUD in the near term, the pair could probably show slumps further in the near term.

By Niranjan Patil
  • Market Data
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