Observe the circled area on technical chart, we spot out a sharp gravestone doji candle at around 0.7285 that has shown its impact drag below.
The pair has slid below strong supports at 0.7070 from the today's highs of 0.7171, currently hanging at the same juncture. This has to be perfectly served as the next bearish setup for the AUDUSD theme.
Leading oscillators are to substantiate this bearish stance, the RSI on monthly chart has reached oversold zone that is still signaling selling pressure.
On daily chart RSI's downward convergence with massive price dips signifies bulls seem to be completely lost the controls of rallies.
While continuous %D line crossover from the overbought territory on slow stochastic curve is also evidencing clear selling pressures.
Most importantly, it is on the verge of completion of inverted saucer pattern which should certainly take another 450-500 pips southwards in medium run.
Overall, the major trend has been downtrend dominated by the bears with clear volume confirmation, we believe if it doesn't hold onto the current levels of 0.7070 on a closing base, bears will undoubtedly take over from here onwards for another 50 pips targets downwards.
Downside hedging sentiments are still lingering around pair, as a result ATM puts have been trading 23% more than NPV.
We all know ATM options are more expensive than OTM options, but cheaper than ITM options.
They have the highest vega which means their premium is the most sensitive to changes in the underlying market's volatility to move in either direction. As a result, increases the risk and reward for both option buyers and sellers.
Implied volatility of AUDUSD for 1w-1y contracts is at 12%
Delta risk reversal is negative for 1w-1y contracts = -0.5 to -3.
Whereas on hedging front, by employing 2w At-The-Money vega puts one can multiply returns by twice, thrice or even pour returns exponentially and simultaneously short 1D OTM put on the contrary which gives a cushion for reducing hedging cost by receiving premium.


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