FxWirePro: NZD likely to test channel line resistance – speculate with binary calls but calendar combinations for hedging

For intraday speculators it seems healthy bullish momentum but this bullish swing may prolong for another 80-100 pips (max upto 0.6579 or 0.6633), that is where the retest of channel resistance is the likely event.

As stated earlier, it has taken supports near neckline of double top at 0.6428, we some interim bullish swings in short run considering 0.6633 as a stiff resistance point.

Even though price curve attempting jump but remained well below 21DMA, despite the breach of channel line resistance once in the recent past, "Shooting star and Gravestone doji" patterns occur at peaks of 0.6722 and 0.6828 respectively to evidence further weakness, in the same way we could foresee more bearish pressure in the weeks to come.

More notably, it is observed that whipsaws on intraday price behavior, the price curve lingering 21DMA, stochastic has already approached overbought region and thereby even if it spikes 80-100 pips stochastic is likely to evidence overbought scenes, as a result it doesn't seem to sustain the rallies as stated earlier.

Contemplating on long term downtrend, RSI on weekly shows indecision at current juncture, while MACD also remains bearish trajectory.

The risk bias to antipodean currencies remains firmly to the downside in 2016.

Well, the advice is that long-term investors don't get bull trapped in this pair as it is clearly dipping within a southward channel that has moved way below 21DMA on weekly as well. We are fairly positioned for bearish targets in 2016 and forecast for NZD/USD at 0.59 by Q1 of 2016 and 0.61 by Q4 of 2016.

Trading tips: With spot FX at 0.6531, heading towards the channel resistance, on speculation grounds it is good to go buy binary calls for targets of 50-60 pips.

Alternatively, one can even initiate fresh shorts on rallies keeping 0.6633 as strict stop loss (0.6579 for risk averse) for the southward targets of 150 to 200 pips.

However, on hedging grounds, the recommendation is to go long in 1M at the money -0.5 delta put and simultaneously short 4D (0.75%) out of the money call with positive theta value and delta close to zero.

The value of an option for every point's movement in the underlying is constantly changing. The Delta can be used to measure the value of an option as the market moves. This is useful to monitor directional risk so you may know how much your option's value will increase or diminish as the underlying market moves.