FxWirePro: NZD/USD breaches below triangle support on successive shooting stars and triple top formation – Trade tunnel spread and short hedge

NZDUSD tumbled as shooting star pop-up at the peaks of rallies at 0.6421 & 0.6404 levels and the display of long-legged doji in between. 

As a result, the prices sank from the peaks of 0.6305 to the recent lows of 0.6255 which is the lowest level since 2015. Consequently, the failure swings are observed and plummeted prices below DMAs with bearish crossovers. 

For now, more slumps appear to be likely event upon the intensified bearish momentum as both leading oscillators (RSI & Stochastics) show downward convergence and the bearish DMA & MACD crossovers (refer daily chart).

On a broader perspective, the major trend has breached triangle support and slid below 7-EMAs (refer monthly chart).

While bears likely to extend further on the triple top formation. The momentum oscillators are backing up further downtrend. The intensified selling momentum is signaled by both leading oscillators on this timeframe as well. 

Observe steep slumps below EMAs on breach below the neckline on this timeframe, this reminds the major downtrend as both leading and lagging indicators are still bearish bias in the major trend.

Trading tips: Contemplating above technical rationale, on intraday trading grounds, at spot reference: 0.6262 levels, we advocate executing tunnel spread options strategy with upper strikes at 0.63 and lower strikes at 0.6236 levels, the strategy is likely to fetch leveraged yields as long as the underlying price keeps sliding towards lower strikes on the expiration.

Alternatively, as we foresee major downtrend continuation up to 0.6050 levels, shorting futures of mid-month tenors have been advocated ahead of RBNZ with an objective of arresting further potential slumps, we wish to uphold the same positions. Writers in a futures contract are expected to maintain margins in order to open and maintain a short futures position.