GBPUSD (Cable) has shown steep slumps ever since the failure swings at the stiff resistance of 1.2760/80 levels (refer daily chart). The pair looked vulnerable again on the back of Fed cuts funds rates by 25 bps as widely anticipated, this rate cut is broadly perceived as an insurance against external risks and lower inflation.
Bears shrug-off this Fed cuts, and bearish swings are sliding through downtrend line on this timeframe. Current price is still well below DMAs, while both leading and lagging indicators are bearish bias to indicate more slumps. Both RSI and stochastic curves show downward convergence to the prevailing price slump that signals intensified selling momentum.
On a broader perspective, although the long-term fundamentals look quite constructive, the major downtrend has now resumed with bearish engulfing candles (refer monthly plotting), the slumps below EMAs have retraced 88.6% Fibonacci levels from the April’2018 highs as both leading and lagging indicators on this timeframe are also in tandem with the selling sentiments.
The bearish EMA and MACD crossovers also substantiate major downtrend that is most likely to prolong further.
Trading tips: On trading perspective, at spot reference: 1.2115 levels, contemplating above technical rationale, it is advisable to execute tunnel spread options strategy with upper strikes at 1.2161 and lower short lower strikes at 1.1986 levels, thereby, one can achieve certain yields as long as the underlying spot FX keeps dipping below lower strikes on the expiration.
Short hedge: Alternatively, on hedging grounds ahead of BoE that is scheduled for today, 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.


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