FxWirePro: Cable shooting star threatens interim upswings – Trade boundary strikes and short hedge as major downtrend to retrace 78.6% Fibos

Technical chart and candlestick patterns of GBPUSD (cable): Shooting star patterns pop up at 1.2861 and 1.3755 levels on daily and monthly plotting respectively, consequently, the minor trend attempted to slide below DMAs, while the major downtrend has constantly been sliding below EMAs. 

For now, although cable’s current price sentiments are attempting to build on the rebound from the lows of 1.2476 regions, the bullish sentiments for the day is yet to get confirmation by the momentum indicators.

Nevertheless, 1.2927 level is still perceived as the major barrier ahead of 1.3045 recent highs. Intraday bearish momentum risks a deeper test of pivotal support in the 1.2810 regions, with failure swings through is risking a return towards the 1.2475 range lows. 

On a broader perspective, we saw the resumption of major downtrend after brief consolidation phase, slumps below EMAs are observed upon shooting star formation.

For now, the trend is on the verge of retracing 78.6% Fibonacci levels as both leading and lagging indicators in tandem with selling sentiments & bearish EMA crossover.

More rallies likely only if RSI breaks-out stiff resistance of 58 levels where it showed faded strength in the recent past. Both leading (RSI & Stochastic curves) and lagging (EMAs & MACD curves) indicators signal weakness of this pair. While the USD is on the back foot, which may limit the downside in the near-terms. 

Trade tips: On trading perspective, at spot reference: 1.2864 levels, contemplating above explained intraday technical rationale, it is advisable to trade barrier option strategy using boundary strikes, upper strikes at 1.2915 and lower strikes at 1.2810 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 1.2424 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 130 levels (which is bullish), while hourly USD spot index was at -22 (mildly bearish) while articulating (at 08:48 GMT). 

For more details on the index, please refer below weblink: http://www.fxwirepro.com/currencyindex