FxWirePro: GBP/CAD Minor Downtrend Intact On Triple Top, Head & Shoulder Reminds Major Downtrend – Trading & Hedging Setup
FxWirePro: Cable’s hammer takes-off rallies above DMAs, Can bulls breakout descending triangle in major trend?
GBPUSD (Cable) has been holding stronger above DMAs despite Fed’s 25 bps rate cuts last night, hammer pattern candle bottomed-out and takes-off rallies above DMAs with bullish crossovers, while both leading & lagging indicators signal bullish momentum to bring in more rallies. The trend for the day has gone in sideways with little overbought sentiments.
The stern bullish engulfing candles have occurred at 1.2251, 1.2344 and 1.2494 levels (on the daily chart). Consequently, the minor trend spikes above DMAs with bullish MACD and DMA crossovers.
The hammer has occurred at 1.2082 level, ever since then the bulls take over the control of minor trend, bullish DMA and MACD crossovers confirm the minor uptrend continuation, while the major downtrend still remains intact, we are firm with our long-term study.
Although both RSI and stochastic curves show upward convergence to the prevailing price rallies that intensify the buying momentum in the interim uptrend, the leading oscillators have entered in overbought territories.
On a broader perspective, bearish engulfing is traced out at 1.2154 (on the monthly chart) that extends major downtrend and retraces more than 88.6% Fibonacci level as per our previous anticipation from the April’2018 highs as both leading and lagging indicators on this timeframe are in tandem with the selling. In this downward journey, bears have formed the descending triangle pattern.
Both RSI and stochastic curves, on this timeframe, show downward convergence to the prevailing price slump that signals the intensified selling momentum.
The bearish EMA and MACD crossovers also substantiate major downtrend that is most likely to prolong further.
The puzzling question, for now, is that ‘can interim bulls manage to break out descending triangle resistance?’
Trading tips: We are exactly where we were when the last call was advocated, at spot reference: 1.2468 levels, on trading perspective, contemplating above technical rationale, it is advisable to execute boundary spread options strategy with upper strikes at 1.2532 and lower strikes at 1.2429 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 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.