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Use AUD/USD bounces to enter shorts but dont be bull traped

FX:AUDUSD   Australian Dollar/U.S. Dollar
221 0 2
It has tested supports at 0.6930 levels to bounce back with leading oscillators showing positive convergence.

Previous to which it has also shown rising volumes on declining prices would bring in more downside potential further towards 0.69 areas.

In addition to that we have also seen a decisive break below strong supports at 0.7070, currently attempting to recover at the same juncture but we cannot afford to build fresh longs before bounce above 0.7070 again convincingly.

Although leading oscillators are giving bullish crossover on daily terms but undoubtedly bearish in medium terms, the RSI on monthly chart has reached oversold zone that is still igniting selling pressure.

While continuous %D line crossover from the overbought territory on slow stochastic curve is also evidencing clear selling pressures.

So the RSI's divergence to the previous drops and stochs bullish crossover could only be attributed as an opportunity for potential bears in the days come.

Most importantly, it is on the verge of completion of inverted saucer pattern which should certainly take another 400-450 pips southwards in medium run. This has to be perfectly served as the next bearish setup for the AUDUSD             theme.

Overall, the major trend has been downtrend dominated by the bears with clear volume confirmation, we believe if it doesn't breakout above 0.7070 on a closing base, bears will certainly bring in a drag again and take over from here onwards for downwards targets.

Hence, idea has to be rather than going short on these puzzling rallies which are unconfirmed, it would be wise to use them for fresh shorting opportunities.

Since downside hedging sentiments are also lingering around this pair, as a result ATM puts have been trading 28% more than NPV.

We all know ATM options are more expensive than OTM options, but cheaper than ITM             options.

They have the highest vega             which means their premium is the most sensitive to changes in the underlying market's volatility to move in either direction. As a result, increases the risk and reward for both option buyers and sellers.

Implied volatility of AUDUSD             for 1w-1y contracts is at 12.5%

Delta risk reversal is negative for 1w-1y contracts = -0.5 to -3.2.

On hedging front, by employing 2w At-The-Money vega             puts one can multiply returns by twice, thrice or even pour returns exponentially and simultaneously short 3D OTM put on the contrary which gives a cushion for reducing hedging cost by receiving premium.
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