FxWirePro: Cable Bulls Breakout Triangle Resistance But Wedged Between 21 & 100-EMAs On Overbought Pressures and RSI Divergence

Cable’s (GBPUSD) prices are bouncing around in a 1.2800-1.3000 range. While over 1.2800 support we see a test of resistance in the 1.3075 region, but divergence developing in the daily studies warns that the upside is limited in the short term. 

Back-to-back hanging man & spinning top patterns coupled with the RSI divergence and the overbought pressures hamper interim rallies. 

For now, the pair is attempting to slide below 7DMAs but goes in a narrow range, the sideway trend seems to be most likely to persist.

As such, in the run up to the general election, we are inclined for a 1.2650-1.3075 type range to develop. A clear break and close above 1.3075 (i.e. around 100-EMAs) would expose us to allow for a test closer towards the medium-term 1.3400 range highs, while a break below 1.2650 would risk a deeper setback towards 1.2300-1.2200 again.
On a broader perspective, Bulls break-out triangle resistance, major downtrend remains below 100-EMAs despite interim rallies, upswings may extend but 100-EMAs major hurdle.

the major trend bias is that 1.1490 was a major low, but a break below 1.1950 would question that and probably see those supports re-tested. A move back above 1.34 supports our analysis, with 1.40-1.45 key long-term resistance above.

Overall, although the buying sentiments in sterling are round the corner that is engulfed with the overbought pressures and the major downtrend sentiments as well.

Trading and hedging tips: At spot reference: 1.2882 levels, on trading perspective, contemplating above technical rationale, it is advisable to execute boundary spread options strategy with upper strikes at 1.2917 and lower strikes at 1.2843 levels, thereby, one can achieve certain yields as long as the underlying spot FX keeps dipping below lower strikes on the expiration.

Alternatively, on hedging grounds ahead of BoE monetary policy, long-term investors are advised 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.