Menu

Search

  |   Technicals

Menu

  |   Technicals

Search

FxWirePro: AUD/NZD PRBS well placed as a hedging material in conformity with spinning top and rising volumes

Both weekly and monthly graphs suggest bearish signals, the spinning top on peaks with substantial volume confirmation, more importantly a long real body bearish candle occurred at 1.0924 with huge volumes. While %D crosses over near 80 levels indicates overbought scenes.

Leading oscillator (RSI) is converging according to the price dips and rises, states indecision at this stage but little bias towards south. Contemplating the previous long term downtrend we think the pair is likely to head towards downwards. RSI is currently 48.8933 and %D line is at 81.7227 and %K line at 71.8870 on slow stochastic.

Put Ratio Back Spread: AUD/NZD

For now, with the above technical reasoning, we recommend arresting further downside risks of this pair by hedging through Put Ratio Back Spread.

The reason for depleting strips and deploying back spread is that it is proportionately less chances of spiking in short run, but to mitigate any abrupt upside risks and safeguard our targets downside 2 out of the money puts are suffice with 1 short. Expect the underlying currency exchange rate of AUDNZD to make a larger move on the downside.

Thus, purchase 1M 2 lots of At-The-Money -0.51 delta puts and sell 1M one lot of (1%) In-The-Money put option. The short ITM puts funds to the purchase of the greater number of long puts and the position is entered for no cost or a net credit. The delta of combined positions should be around -0.39 with slightly negative theta value.

  • Market Data
Close

Welcome to EconoTimes

Sign up for daily updates for the most important
stories unfolding in the global economy.