FxWirePro: Cable slides through falling wedge – Trade one-touch put and short hedge ahead of BoE

GBPUSD price behavior, in the minor trend, slides through the falling wedge which is the bearish pattern, the prevailing interim upswings are restrained below 7 & 21-DMA levels.

For now, the breach below wedge support is most likely to bring in more slumps as both leading and lagging indicators are bearish bias.

Cable prices are finding some two-way price action around 1.2900 with divergence in the intra-day studies we highlighted yesterday now unwinding. 

However, a rally back through resistance at 1.2960, 1.3000 and 1.3040 is needed to alleviate underlying bear pressure and suggest this week’s break of range supports is a false one. While under those levels risks remain for a further extension towards next key support in the 1.2825-1.2775 support region. A break there does a lot of technical damage to our more constructive longer-term outlook.

On a broader perspective, the long-term analysis remains constructive, but a move above 1.3400 is needed to give us the higher conviction that 1.2480 was a major low and we move into an upper range under 1.4500 levels.

Trading tips: Contemplating above technical rationale, if the bearish sentiments sustain, then, bears are most likely to drag further dips up to 1.2866 levels. Thus, at spot reference: 1.2910 levels, one-touch put option strategy is advocated on an intraday trading basis, using lower strikes at 1.2866 levels.

The trading strategy likely to fetch leveraged yields that would be exponential than spot trades when the forward FX prices keep sliding further up to lower strikes on the expiration.

Short hedge: Alternatively, on hedging grounds ahead of BoE’s monetary policy next week, long-term investors are advised to stay short in futures contracts of mid-month tenors. The writers of the 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 56 levels (which is bullish), while hourly USD spot index was at 62 (bullish) while articulating (at 11:58 GMT). 

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