AUD/NZD Chartpack - Technicals, Trading & Hedging Setup

Can AUD/NZD Gravestone Doji & Hanging Man Keep Interim Consolidation On Check? Trading & Hedging Setup:

Of late, AUDNZD’s minor downtrend goes in the range, it has been oscillating between 1.0475 – 1.0307 levels (refer daily chart).

The upswings have failed at 1.0447 levels (i.e. near stiff resistance of 1.0452 level) and closed at 1.0418 levels, consequently, gravestone doji pattern candle has occurred at that juncture at 1.0418 levels yesterday. As a result, the pair has slid below 1.04 levels today.

The gravestone doji coupled with RSI's failing strength and hanigng man pattern on monthly plotting signal the renewed weakness for now, expect more rallies only upon the decisive breakout above the stiff resistance levels.

Otherwise, the minor downtrend is most likely to prolong further and we could foresee further potential to break below 1.04 levels.

Since the early December, NZD has showing resistance, the pair at around 1.0450 – 1.05 levels that have been tested several times in the recent time and failed, but remains vulnerable to a break higher. 

The major downtrend has gone in the consolidation phase and forming prolonged range-bounded trend. However, the major downtrend remains intact as the current price slides below 7, 21 & 100-EMAs despite the interim rallies in this month. While both leading and lagging oscillators have been in bear’s favour.

Trade tips: 

At spot reference: 1.0405 levels, on trading perspective, contemplating above technical rationale, it is advisable to execute boundary spread options strategy with upper strikes at 1.0427 and lower strikes at 1.0380 levels, thereby, one can achieve certain yields as long as the underlying spot FX remains between these two strikes on the expiration.

Alternatively, on hedging grounds, we advocated directional hedges ahead of RBNZ monetary policy that is scheduled for the next week, initiate longs in AUDNZD futures contracts of February’2020 deliveries and simultaneously, shorts in March’2020 deliveries for the major downtrend. 

Thereby, one can arrest the momentary upside movements of the underlying spot FX, and directionally position via shorts of March deliveries to hedge the downside risks in the major trend. The directional implementation of the same trading theme by further allow for a correlation-induced discount in the options trading also if you choose strikes appropriately.