FxWirePro: Cable Bears Back In Action Upon Breakdown Below Trendline Support With Stern Engulfing – Trading & Hedging Setup

Cable prices (GBPUSD) have collapsed considerably in the low liquid environment, with historically strong indicators not working at this juncture. 

Bulls in the minor trend have halted on hanging man & shooting star patterns, while bears managed to breach uptrend line support decisively with the stern engulfing candles. 

Consequently, the resumption of downtrend seems to be most likely as the current price nudge below DMAs, while both leading and lagging oscillators are also moving in tandem with the bearish swings.

The prevailing price action continues to lurch lower, consolidate sideways for a while and then drop again. (The average true range over the last week has moved to around 278 pips, from around 100 around the beginning of March).

A recovery back through 1.1950-1.2050 would be a first indication of real stability. Otherwise, intra-day resistance lies in the 1.1675-1.1770 region ahead of there.

Overall, bulls in the minor trend have halted upon hanging man and shooting star formations, the bearish MACD & DMA crossovers are indicative of further price slumps.
On a broader perspective, hanging man pops at 1.3202 levels to disrupt the last 3 and a half years’ consolidation phase, while bears break-down triangle support (refer monthly chart). The current price tumbles below 7, 21 & 100-EMAs, consequently, the major downtrend resumes and hits multi-years’ lows (1.14) as both leading and lagging oscillators are bearish bias on this timeframe.

Next projected downside levels are 1.1110-1.1080, the psychological 1.10 region, then 1.0840-1.0800 with 1.0625/1.0590 below there. Bloomberg shows the 1985 low as 1.0520, but we reckon it traded down to 1.0045.

Trading tips: 

Contemplating above technical rationale, at spot reference: 1.2435 levels, the tunnel spreads are advocated on trading grounds with upper strikes at 1.2495 level and lower strikes at 1.2375 levels.

Alternatively, activated shorts in GBPUSD futures contracts of April’20, we now wish to uphold the same strategy by rolling over May month deliveries with an objective of arresting potential slumps.