FxWirePro: EUR/JPY slips below daily cloud, better-than-expected EU Consumer Confidence indicator fails to impress
FxWirepro: Cable Heads Towards Major Resistances, Consolidation Looks Healthy, Flurry of Bearish Candles Threaten – Trading & Hedging Setup
Cable prices have continued to consolidate after edging above 1.31 areas but for now, mild overbought pressures are seen.
Technically, bulls have managed to breakout the stiff resistances decisively, the current price spikes above 7 & 21-DMAs. Upon the breakout of stiff resistances at 1.2650 and 1.2818 levels, GBPUSD is now tested channel resistance with some mild exhaustiveness for now. shooting stars & dojis are popped-up, at this juncture, to indicate exhaustiveness as both leading & lagging oscillators are also signalling overbought pressures.
Although the pair is showing renewed bullishness signalled by trend as well as the momentum indicators (refer weekly chart).
Both leading (RSI & stochastic curves) show upward convergence to the ongoing ralliesm now indicating the overbought momentum.
To substantiate the bullish stance, the lagging oscillators (7 & 21-DMAs and MACD) are in line with prevailing upswing.
Any pullbacks are expected to remain corrective at this stage, with 1.2975 intra-day support. A decline through there would be a warning sign of a broader turnaround, while we should see another push towards the next main resistance area lying in the 1.30-1.3060 region (ascending channel). That ahead of the more important medium-term resistance zone from 1.33 region. We are still biased for prices to remain in a range under that region for now.
On a broader perspective, we remain biased that the bear cycle from the 2007 and 2014 highs completed with a major ‘double-bottom’ in the 1.15-1.14 region.
Trade tips: On trading perspective, contemplating above technical rationale at this juncture, it is advisable to execute tunnel spread options strategy with upper strikes at 1.3185 and lower strikes at 2975 levels, thereby, one can fetch certain yields as long as the underlying spot FX keeps dipping but remains well above the lower strikes on the expiration.
Alternatively, on hedging grounds we advocated shorting futures contracts of mid-month tenors, we wish to uphold the same strategy as the underlying spot FX likely to target southwards below 1.27 levels in the medium run (spot reference: 1.3125 levels). Writers in a futures contract are expected to maintain margins in order to open and maintain a short futures position.