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NZD/USD breaks trend line support, oscillators signal weakness

FX:NZDUSD   New Zealand Dollar/U.S. Dollar
208 0 2
The pair has broken trendline support at 0.6619 yesterday showing further weakness. We could foresee the next strong levels of support only at 0.6541.

This has struggled and failed to hold onto 0.6619 levels which has acted as crucial support and resistance in the recent past as well (see circled areas).

One can initiate fresh shorts at current levels keeping 0.6619 as strict stop loss for the target of 55 to 60 pips.

Shooting star candle pattern is occurred at 0.6737 levels on daily charts at peaks which has evidenced the pair to slip below 10DMA and the trend on this chart has started showing short term downtrend continuation as the RSI (14) has shown downward convergence with every price dips.

RSI on daily chart is converging downwards at 45.4693, while %D line crossover on slow stochastic curve is seen even below 20 levels which is oversold zone.

Currently, %K line trending at 6.1707 and %D line at 8.7312 while articulating).

Kiwi dollar after long lasting losing streak that has begun from mid April, now the attempt of recovery does not seem persist.

On weekly charts, from last April the pair has been tumbling non-stop from the peaks at 0.7736 levels to evidence the huge loses.

Overall, Kiwi dollar's a long lasted losing streak that was started from last 1 year or so to hit almost 6 year's lows is now most likely retest.

So far the major trend was downtrend dominated by the bears and it is heading southwards for 0.6541 1st and may even expose to 0.6480 levels.

Long term Hedging Perspectives: Calendar combinations to reduce hedging cost

When all eyes tend to drag this currency towards further slumps and eyes on bearish instruments (puts obviously tend to be costlier), on a long term perspective, contemplating the above critical support we build neutral calendar spread on this pair favoring potential downside risks.

As the volatility near month ATM contracts of NZD/USD             ATM contracts is to perceive at 13.46% which is comparatively higher in APAC currency baskets except AUDUSD             .

Deploying customized calendar combination using ATM call shorts at current juncture is more suitable considering when puts seem overpriced.

Here, idea is not to go against the trend but on hedging grounds, strategy goes this way-

Kiwi dollar after a long lasted losing streak that was started from last 1 year or so to hit almost 6 year’s lows has now changed its direction. Buy 2m (mid month) at the money -0.5 delta put and simultaneously short 1w near month contract (1%) in the money call with positive theta value.

As shown in the diagram when IV is 13.46%, ATM call seems to be overpriced (premiums trading more than 14%, while puts are 13%), as a result with trend being bearish shorting calls would finance the long positions in puts.

Trading tips: On speculative grounds, one can initiate even fresh shorts at current levels keeping 0.6619 as strict stop loss for the target of 55 to 60 pips.

Refer below link for IV and NPV nutshell:

http://www.econotimes.com/FxWirePro-NZD-USD-calendar-combinations-to-reduce-hedging-cost-112114
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