NZD/JPY Breaks But Hangs on Major Support at 74.143, more Bearish Scope Upto 72.883
The pair rallied upto 74.699 after testing supports at 74.143 levels.
But during later stage of last week prices have dropped below DMAs after testing stiff resistance at 76.951 levels, as a result we’ve seen the formation of bear candles with big real body.
Sustenance above support at 74.143 would bring minor gains but break below would create more bearish rout, Use rallies as shorting opportunities, major trend is bearish.
From last three months or so the pair has been holding strong support at 74.143 (see monthly charts).
Current price slid below 7&21EMAs consistently that signals downtrend to prolong, rising volumes to substantiate the downtrend.
On monthly chart, to begin May month, even though prices have slightly jumped above 74.478 it has remained well below EMAs.
Moreover, 21EMA crosses over 7EMA that signals downtrend continuation.
MACD entering into below zero levels to signal bearish trend to prolong ahead.
Massive volumes on declining streak are conformity to the strong downtrend.
The leading oscillators have been converging downwards below 42 levels, subsequently, stochastic curves have reached oversold territory but there are no signs of bullish crossover.
Hence, if it does not manage to sustain 74.143 levels on a closing basis we could foresee more dips upto the next support only at 73.245 levels and bears may even drag upto 72.883 levels again in medium terms.
Trade tips: Option Tunnel Spread
Spot ref: 74.451, NZDJPY IVs are at 23.35% (while articulating).
We wouldn't be surprised even if it hits 73.245 levels or below shortly or 75 on north in intraday terms.
So on intraday terms, we rely on bearish signals by technical indicators using abrupt upswings, well, thereby the smart way to approach these type of swings is to deploy the option tunnel using ATM puts is structured as a binary version of a conventional put spread, i.e. long delta puts with higher strikes while writing the lower strikes for above mentioned targets on either side.
Therefore an In-The-Money tunnel would be formed of an In-the-money strike (75) put below the current exchange rate less an Out-Of-The-Money strike (73.245) put above the exchange rate
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