FxWirePro: Cable engulfing pattern pops up to resume bearish trend – Trade boundary strikes and short hedge

Bearish engulfing pattern pops at stiff resistance of GBPUSD, consequently, the current price slid below 7DMAs, 

For now, cable price sentiments are attempting to build on the rebound from the lows of 1.3083 region, the bullish sentiments for the day is not backed by the momentum oscillators. 

Nevertheless, 1.3217 is still perceived as the major barrier ahead of 1.33 recent highs. As you could closely watch, the earlier support now acts as the stiff resistance.

But the prices are back under pressure at around 1.3181 levels, after grinding back towards the top of the recent range. 

Bear momentum risks a deeper test of pivotal support in the 1.30-1.29 region, with a breakdown through there risking a return towards the 1.2660 range lows. Support is seen around 1.2800 ahead of those August lows.

On a broader perspective, we believe the bear cycle, that began back in 2007 at 2.1160, completed at 1.1490. On a multi-year basis, this suggests mean reversion back to 1.50-1.60.

From last three days, bulls have been attempting to hold onto the strong support at 1.30 levels, but for today, drift in sideways today after failure swings at 1.3059, More rallies likely only after breaking-out stiff resistance.

While the USD is on the front foot, which may limit the upside, unless we get significant Brexit deal news, in which case we could allow for a move towards 1.34-1.35 zone, but crosses are likely to reflect this strength more so. 

Trade tips: Well, on trading perspective, at spot reference: 1.3161 levels, contemplating above explained technical rationale, it is advisable to trade barrier option strategy using boundary strikes, upper strikes at 1.3191 and lower strikes at 1.3114 levels, the strategy is likely to fetch leveraged yields as long as underlying spot FX remains between these strikes on expiry duration.

Alternatively, on hedging grounds, shorting futures contracts of mid-month tenors were advocated, now we wish to uphold the same position as the underlying spot FX likely to slide southwards 1.2785 levels in the near terms.

Writers in a futures contract are expected to maintain margins in order to open and maintain a short futures position.

Currency Strength Index: FxWirePro's hourly GBP spot index is inching towards -164 levels (which is bearish), while hourly USD spot index was at -116 (bearish) while articulating (at 13:04 GMT). For more details on the index, please refer below weblink:

http://www.fxwirepro.com/currencyindex