FxWirePro: AUD/USD bulls bounce back with hammer pattern on Aussie unemployment prints, major downtrend to drag 18-month lows

AUDUSD forms hanging man and hammer patterns at 0.7428 and 0.7238 levels respectively and the stiff resistance at 0.7454 and strong support at 0.7319 areas are observed.

Hanging man at stiff resistance plummets prices below DMAs, while hammer attempts to counter but the prevailing rallies are not backed by technical indicators and volumes.

Thereby, you could see the tight tug of war between bulls and bears. As a result of this sort of price behaviour, we saw range bounded and prolonged trend in the recent past (see rectangular area on daily plotting). But for now, since bears have managed to breach below strong support, more slumps likely on bearish DMA and MACD crossovers.

The intermediate trend has been extending double top formation with breach below neckline and head towards 1 and a half year lows (refer monthly plotting), bearish engulfing candle followed by shooting star patterns plummet prices below 7EMA again on this timeframe. In this journey, the pair shrugs off hammer pattern candle as bears extend price slumps. 

Both RSI and stochastic curves have constantly been showing downward convergence to signal bearish momentum. While we see bearish EMA crossover with rising volumes with dipping prices, this indicates downtrend to prolong further.

Trade tips: On trading perspective, at spot reference: 0.7268 levels, using ongoing rallies it is advisable to buy at-the-money vanilla put option of 1w expiries, the strategy is likely to fetch leveraged yields as long as underlying spot FX keeps dipping lower 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 0.72 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 104 levels which is bullish on improved Australian unemployment prints (actual 5.3% versus previous 5.4% and consensus 5.4%), while hourly USD spot index was at 4 (neutral) while articulating (at 06:14 GMT). For more details on the index, please refer below weblink:

http://www.fxwirepro.com/currencyindex