FxWirePro: EUR/AUD Chartpack – Technical and FX Derivatives Trade Setup

Technical Chart and Candlestick Patterns: Please be noted that EURAUD slumps below 7 & 21-DMA after the failure swings at stiff resistance areas of 1.6040 – 1.6066 levels (refer daily plotting).

The occurrence of shooting star at 1.60 levels plummets prices below DMAs, while bulls attempt to counter yesterday, but all technical indicators bearish bias.

Both RSI & fast stochastic curves are showing downward convergence to indicate selling momentum. For now, more slumps are likely on bearish DMA and MACD crossovers.

On a broader perspective, back-to-back shooting stars pop-up at peaks coupled with the overbought signal by leading oscillators, while major trend goes in range but slightly bearish bias (refer monthly chart).

Overall, last month rallies are exhausted and bears resume but the major trend is still stuck in the range with lingering bearish biasness. Hence, the 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: 1.5848 levels, contemplating above technical rationale, we advocate tunnel options spread with upper strikes at 1.59 and lower strikes at 1.5780 levels, the strategy is likely to fetch leveraged yields as long as underlying spot FX remains between these strikes on the expiration.

Alternatively, on hedging grounds, shorting futures of mid-month tenors are advocated with a view of arresting further potential slumps. 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 -52 levels (which is bearish), while hourly EUR spot index was at -115 (bearish) while articulating (at 12:54 GMT).

For more details on the index, please refer below weblink: http://www.fxwirepro.com/currencyindex