FxWirePro: Cable Minor Trend Weaker on Bearish Crossover, Major Trend Consolidates Upon Triangle Breakout – Trading and Hedging Setup

Cable after pulling back from Friday’s election peak of 1.3514, the minor trend slides below 7 & 21-SMAs, bears now attempt for further dips by nudging below SMAs upon most likely bearish SMA crossover.

We continue support from there down to 1.3205 levels. A decline through 1.3305-1.3205 support would warn of a broader correction taking shape, with 1.3050-1.2960 important daily trend support below.

Both leading and lagging indicators are bearish bias, RSI and Stochastic curves show downward convergence to the ongoing price dips to signal selling momentum. While bearish MACD crossover substantiates the minor downtrend continuation.

On a broader perspective, Bulls break-out triangle resistance, but the major downtrend still remains below 100-EMAs despite interim rallies, upswings may extend but 100-EMAs major hurdle

The major trend the break of 1.34 supports our view that the cycle from the 2007 highs at 2.1160 completed at 1.1490 in 2016, with a higher low at 1.1950 this year. As such an eventual recovery through 1.45 towards 1.60/1.65 is expected in a long-run.

While over, our bias is for a gradual move towards the 1.40-1.45 long-term range highs, but we believe it is unlikely we get through that upper area, with a medium-term range to develop under there more likely.

Trading and hedging tips: At spot reference: 1.3265 levels, on trading perspective, contemplating above technical rationale, it is advisable to execute boundary spread options strategy with upper strikes at 1.3309 and lower strikes at 1.3184 levels, thereby, one can achieve certain yields as long as the underlying spot FX remains between these two strikes on the expiration.

Alternatively, ahead of BoE monetary policy that is scheduled for this week, on medium term hedging grounds we advise to maintain short positions 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.