FxWirePro: Cable tests trendline support but bulls restrained below 7-DMAs, major downtrend retraces 88.6% Fibos

Cable (GBPUSD) has shown steep slumps ever since the failure swings at the stiff resistance of 1.2580, 1.2760 and 1.3203 levels (refer daily chart).

GBPUSD bears shrug-off the recent 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 the 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: 1.2055 levels, contemplating above technical rationale, it is advisable to execute tunnel spread options strategy with upper strikes at 1.2106 and lower short lower strikes at 1.2014 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 UK CPI print 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.