In our previous write up, we traced heaps of bearish indications for NZDUSD, consequently, we’ve been seeing steep slumps from the last three months.
The major trend seems to have been exhausted at 50% Fibonacci retracements. That’s where a bearish engulfing candle has occurred at 0.7176 levels followed by a shooting star candle at 0.7204 levels (refer monthly chart).
On daily terms also, Shooting star & bearish engulfing patterns occur at 0.7355 and 0.7248 levels respectively (refer daily chart in a magnified mode).
The occurrence of these bearish patterns at stiff resistance zones of 0.7416 – 0.7379 is more noticeable, historically, the rallies have been restrained below these resistance levels (refer daily chart).
You could make out that amid this downswings, the bears have managed to break below major strong supports at 0.7244 (21DMA) and 0.7196 levels, consequently, we could foresee more slumps upon these flurry of bearish indications.
Both leading oscillators (RSI and Stochastic curves on daily terms) have been constantly converging to the ongoing price dips that signal the strength and intensified momentum in the bearish trend.
On a broader perspective, the bulls extended rallies above EMAs in consolidation phase but again restrained below 50% Fibonacci retracements from the lows of 0.6196 mark (refer monthly charts).
For now, with the occurrence of bearish engulfing and shooting star patterns, the major trend now seems to be weaker again.
Well, contemplating above technical rationale in both short and intermediate terms, we advocate one touch binary put options to capitalize on prevailing selling sentiments upto 0.7137 (i.e. around another 20-25 pips southwards from the spot reference of 0.7160. These leveraged instruments are likely to fetch magnified effects in payoff structure as long as underlying spot FX keeps dipping.
Alternatively, we recommended a limited loss structure via double-no-touch optionality to fade Fed fears of December hikes in next 3-months, NZDUSD 3m DNT with 0.7571/0.6822 strikes – but we are reluctant to sell volatility outright given the unquantifiable risk. However, shorting volatility and fading the spike in skew through limited loss structures (i.e. DNT’s) could be appropriate.
Currency Strength Index: FxWirePro's hourly NZD spot index is inching towards -33 levels (which is bearish), while hourly USD spot index was at shy above -5 (neutral) at the time of articulating (at 05:54 GMT). For more details on the index, please refer below weblink:
FxWirePro launches Absolute Return Managed Program. For more details, visit: