FxWirePro: AUD/USD Chartpack – Technicals, Trade & Hedging Setup

AUDUSD has continued the last week’s rallies, it has potential to break above 0.6762 levels, supported by improving global sentiment. Upswings above 7,21 & 100-DMA with bullish crossovers, minor uptrend likely intensify breakout above the stiff resistance. While both leading oscillators have entered in the overbought zone and to show selling pressures (refer daily chart).

The revival in global equities to early March levels has driven the Aussie to 0.66, our end-2020 target. Aggressive central bank policy settings should help ensure A$ does not return to the sub-0.60 trade of late March, but in coming weeks the reality of a tepid global recovery in H2’20 and woeful earnings reports are likely to chip away at risk sentiment. Scope for 0.62 end-June. 

On a broader perspective, although interim bulls are extending further but restrained at 7 & 21-EMAs, bears are most likely to drag price slumps upon breakdown below double top neckline (refer monthly chart. The major downtrend remains intact as both leading & lagging indicators indecisive but bearish bias.

Trade tips: On trading perspective, contemplating above technical rationale, at this juncture, it is advisable to execute boundary options strategy with upper strikes at 0.68 and lower strikes at 0.6628 levels, thereby, one can fetch certain yields as long as the underlying spot FX remains between these two strikes on the expiration.

Alternatively, on hedging grounds we advocated shorting futures contracts of mid-month tenors, we wish to uphold the same strategy as the underlying spot FX likely to target southwards below 0.65 levels in the medium run (spot reference: 0.6750 levels). Writers in a futures contract are expected to maintain margins in order to open and maintain a short futures position.