FxWirePro: Further EUR/AUD slumps likely, avoid fresh long build ups – stay firm with longs on PRBS

In our earlier post, we stated the target of 1.5696 levels to bounce back again, it has pretty much achieved our earlier, you can now see the spikes. But for now we again like to reiterate even though prices are showing strength today it is falling well below moving average curve as well, so we believe with all these bearish indications, the pair to either remain stagnant or drag towards 1.5696 levels to bounce back again. Use these rallies stay calm with earlier ITM long puts instead of fresh long build ups.

EURAUD breaks channel line support once again at around 1.5917 levels previous to which it has formed spinning top as well but inching towards little upwards slowly, while weekly leading oscillators puzzle by signaling bearish trend as they are converging downwards to the dropping prices.

RSI curve is currently trending at 48.4195 and an attempt of %K line crossover at 20 level (current %D is at around 19.9596 and %K is at 31.3173) on daily charts.

Put writers must be alright with the current levels of this pair because on 21st September we advised OTM shorts with 4 day expiry which must have definitely booked profits as the price moved above and 2 lots of 15D longs on ITM puts should be on the job with dips which we've been seeing from last couple of trading sessions in arrow form the highs of 1.6249 levels.

EURAUD is currently trading at 1.5755, from here onwards our 2 lots of 15D longs on ITM strike vega puts would start maximizing profits considering the current short term downtrend. Vega in a back spread is generally dominated by the long options the more time there is to expiration and the closer EURAUD is to the strike price of the long options.

15 days of expiration on longs sets up generally the more positive vega the back spread. The reason for this is that far from expiration, the difference between the vega of one strike and the next is relatively small. This is an income strategy. You are looking for a net credit if the pair stays within a range or rises.