US Fed and BoE are the major events for this week, the Fed may be on hold but the absolute level of USD interest rates remains supportive of short-term capital flows to USD.
BoE is also scheduled for monetary policy this Thursday. Ongoing political uncertainty indicates a continuation of the ‘wait-and-see’ message regarding the timing of the next bank rate hike.
Amid these two monetary policy events, GBPUSD price behavior, in the minor trend, slides through the falling wedge which is a bearish pattern, the prevailing interim upswings are restrained below 7 & 21-DMA levels.
Any 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 1.2950 with convergence in the intra-day momentum studies.
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, at spot reference: 1.2941 levels,
it is advisable to execute boundary strike options strategy with upper striking options at 1.2966 and lower strikes at 1.2872 levels, thereby, one can achieve certain yields as long as the underlying spot FX remains well in between these two strikes on the expiration.
Short hedge: Alternatively, on hedging grounds ahead of Fed and BoE’s monetary policies this 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 6 levels (which is neutral), while hourly USD spot index was at -96 (bearish) while articulating (at 05:24 GMT).
For more details on the index, please refer below weblink: http://www.fxwirepro.com/currencyindex
