FxWirePro: GBP/CAD double bottom evidences rallies, shooting star counters – Trade tunnel spreads and ATM straddles to hedge

GBPCAD was spiking higher above EMAs so far on double bottom pattern, while the bears counter back double bottom pattern with shooting star candle, both leading and lagging indicators substantiate this bearish sentiment (weekly chart).

Shooting star followed by 3-black crows pattern occurred at the rallies of this pair, the bearish pattern plummets price below 7SMAs, more dips likely on bearish SMA and MACD crossovers (refer 4H chart).

Next strong support is at 1.7045 levels, more dips seem to be likely if it breaches below this level.

Momentum oscillators indicate bearishly, RSI signals faded strength, fast stochastic curves deep in the oversold zone.

Trend indicators – DMAs, EMAs and MACD have shown clear bearish crossovers that indicate bearish swings to prolong further.

Trade Recommendations: Good to stay short on failure swings at 7DMA levels, at spot reference: 1.7398 levels, buy tunnel spreads using upper strikes at 1.7218 and lower strikes at 1.7008 levels.

Sterling also slipped against the US dollar after EU Brexit negotiator Barnier criticised elements of the UK’s latest Brexit proposals. A strong rise in US GDP today may lend some further support to the dollar. However, markets are already looking forward to a very busy week ahead, which includes a key Bank of England meeting.

Alternatively, on hedging grounds, buy ATM straddles ahead of BoE hiking hopes. The strategy comprises of At-the money +0.51 delta call and at-the-money -0.49 delta put options of 2w tenors at net debit with a view of arresting potential FX risks on either side.

Currency Strength Index: FxWirePro's hourly GBP spot index is inching towards -137 levels (which is bearish), while CAD is flashing at 78 levels (which is bullish) while articulating at (07:30 GMT). For more details on the index, please refer below weblink:

http://www.fxwirepro.com/currencyindex