GBP/USD technicals and trading setup | January 10, 2019

GBP/USD trading setup - Cable’s hammer brings in momentary rallies, can bulls break-out channel resistance or bears resume?:

Technical chart and candlestick patterns:  GBPUSD  (cable) has formedshooting star patterns at 1.2739 and 1.4026 levels on daily and monthly plotting respectively. Hammer patterns have countered at 1.2632, consequently, the bulls have taken-off rallies above DMAs. The minor trend has been developing in sloping channel (refer daily chart ).

For now, although cable’s current price sentiments are attempting to build on the rebound from the lows of 1.2373 region, the bullish sentiments in the minor trend can be hampered as it approaches channel resistance.

On the flip side, the minor uptrend is backed by both the momentum and trend indicators.

Nevertheless, 1.2806 level is still perceived as the major barrier for further upward movement.

1.2702-1.2712 region now acts as the strong support. But the prices are back under pressure at around 1.2806 levels, after grinding back towards the top of the recent range.

Any failure swings at channel resistance is risking slumps towards the 1.26 or even lower levels.

On a broader perspective, we saw resumption of major downtrend after brief consolidation phase, slumps below EMAs are observed upon shooting star formation.

For now, the trend is on the verge of retracing 78.6% Fibonacci levels as both leading and lagging indicators in tandem with selling sentiments & bearish EMA crossover.

Overall, from the last couple of days, bulls have been attempting to hold onto the strong support at 1.2702 levels, but for today, drift in sideways today after failure swings at 1.2810, More rallies likely only after breaking-out stiff channel resistance.

Trade tips: Well, on trading perspective, at spot reference: 1.2759 levels, contemplating above explained technical rationale, it is advisable to trade barrier option strategy using boundary strikes, upper strikes at 1.2802 and lower strikes at 1.2702 levels, the strategy is likely to fetch leveraged yields as long as underlying spot FX remains between these strikes on expiry duration.

Alternatively, on hedging grounds, shorting futures contracts of mid-month tenors were advocated, now we wish to uphold the same position as the underlying spot FX likely to slide southwards 1.2424 levels in the near terms.

Writers in a futures contract are expected to maintain margins in order to open and maintain a short futures position.

Currency Strength Index: FxWirePro's hourly GBP spot index is inching towards -76 levels (which is bearish ), while hourly USD spot index was at -36 (mildly bearish ) while articulating (at 08:24 GMT ).