FxWirePro: Cable shooting stars signal weakness in both minor and major downtrend – Bid short hedges as 78.6% most likely

Technical chart and candlestick patterns of GBPUSD (cable): Shooting star patterns pop up at 1.2634 and 1.3755 levels on daily and monthly plotting respectively, consequently, the trend slid below DMAs and EMAs. 

For now, although cable’s current price sentiments are attempting to build on the rebound from the lows of 1.2476 region, the bullish sentiments for the day is not backed by the trend indicators.

Nevertheless, 1.2659 level is still perceived as the major barrier ahead of 1.2705 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 1.2659 levels, after grinding back towards the top of the recent range. 

Bear momentum risks a deeper test of pivotal support in the 1.2475 region, with a failure swings through is risking a return towards the 1.2475 range lows. 

On a broader perspective, we saw 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.

We reckon that 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: 1.2646 levels, contemplating above explained technical rationale, it is advisable to trade barrier option strategy using boundary strikes, upper strikes at 1.2707 and lower strikes at 1.2575 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 -3 levels (which is absolutely neutral), while hourly USD spot index was at -70 (bearish) while articulating (at 11:57 GMT). 

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