FxWirePro: Trade AUD/NZD Tunnel Spread on Shooting Star Formation, OB pressures, Write Strangles on Range-Bounded Trend and Short Hedge

Chart and candlestick patterns formed: Shooting star hampers previous bullish momentum, current prices slide below 7DMAs, both leading oscillators signal overbought pressures on daily plotting, range-bounded patterns on monthly plotting. The major consolidation phase has gone in the range, both leading oscillators indecisive but indicate faded strength.

Shooting stars have occurred at 1.0931 levels that plummet the prices below 7DMAs.

Tunnel spreads: As the bears likely to drag slumps on overbought pressures, at spot reference: 1.0875 levels, tunnel spread options strategy is advocated for the intraday speculative trades, use upper strikes at 1.0904 and lower strikes at 1.0850 levels.

The trading yields are exponential from spot movements, for cash or nothing, these options would be exercised if the forward prices to remain between both strikes (i.e. 1.0904 > Fwd price > 1.0850).

Strangle shorts: As you could observe the swings in the major trend have been oscillating between 1.1423 and 1.0025 levels since December 2013, it is wise to deploy (0.5%) out-of-the-money call and (0.5%) out-of-the-money put options of the 1m tenor as shown in the diagram. The strategy can be executed at the net credit and certain yields would be derived in the form of initial premium received as long as the underlying spot FX remains between OTM strikes on the expiration.

Short hedge: Since the overall major downtrend seems to be quite viable at this juncture, even if you witness any abrupt upswings, that shouldn’t be deemed as panicky buying sentiment. To substantiate this bearish stance, both leading (RSI & stochastic curves) and lagging indicators (EMA & MACD) indicate the downtrend to prolong further.

Alternatively, on hedging grounds, we advocate shorting futures contracts of mid-month tenors as the underlying spot FX likely to target southwards 1.0650 levels in the medium run.

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 flashing at 173 levels (which is bullish), while hourly NZD spot index was at shy above 133 (bullish) while articulating (at 06:19 GMT). For more details on the index, please refer below weblink:

http://www.fxwirepro.com/currencyindex