FxWirePro: AUD/NZD Bulls Ride on Breakout of Double Bottom Neckline, Major Trend Consolidates in Prolonged Range

Chart and candlestick patterns formed: The AUDNZD’s minor trend shows bounce back on the breakout of 1.0729 levels which is the neckline of double bottom pattern (refer daily chart).

Please note that the minor trend has formed double bottom formation with bottom 1 at 1.0275, bottom 2 at 1.0264 and neckline at 1.0729 levels. 

For now, more rallies likely as both the leading and lagging indicators substantiate prevailing uptrend on this timeframe. 

RSI and stochastic curves show upward convergence to the ongoing bullish rallies that indicates the strength and intensified buying momentum.

Consequently, bulls are attempting to make upside traction with the help of bullish DMA & MACD crossovers in both the minor trend and major consolidation phase. 

On a broader perspective, most importantly, the dragonfly doji pattern candles have occurred at 1.0506 and 1.0422 levels on monthly terms. 

As a result, bulls take-off rallies above EMAs, on the contrary, failure swings were observed at the stiff resistance of 7-EMA levels as shooting star pops-up at 1.0631 levels.

Thereby, the major consolidation phase that has lasted for more than 4 and a half years is now stuck in the range, both leading oscillators indicate mild strength but not convincing though.

Overall, some sort of consolidation just above 1.0625 is foreseen but the major range-bounded trend cannot be totally ruled out.

Trade tips: One-touch call options: Contemplating bullish sentiments in the near-terms, if the prevailing bullish sentiments sustain, then, bulls are most likely to extend further up to 1.0825 levels. Thus, at spot reference: 1.0770 levels, one-touch call option strategy is advocated on intraday trading basis, using upper strikes at 1.0825 levels which is 50-55 pips from the current levels.

The trading strategy likely to fetch leveraged yields that would be exponential than spot trades when the forward FX prices keeps spiking higher up to upper strikes on the expiration.

On hedging grounds, we advocated directional hedges, wherein, initiating longs in AUDNZD futures contracts of September’19 delivery and simultaneously, shorts in futures of November’19 delivery for the major downtrend. 

Thereby, one would have arrested upside movements of the underlying spot FX, now we wish to uphold directionally positions via shorts of November deliveries. 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.