Historically, the stiff resistance zone is observed at 1.7130-50 mark.
The doji and shooting stars appear at the peaks of rallies at 1.7060 and 1.7107 levels, the failure swings have occurred with the bearish engulfing candle pattern at the same resistance level.
After a stern bullish rally in the recent price behavior, the momentum is now seemingly hampered after the occurrence of these bearish patterns and unable to sustain at this supply zone.
Consequently, the bears managed to evidence price dips for the day that’s gone to test 7DMAs, where it has taken a strong support. Expect more slumps on a decisive breach below this level and capitalizing on shrinking momentum is a wise move.
Both leading (RSI and stochastic) oscillators are suggestive of intensified bearish momentum.
The stochastic oscillator has been attempting to pop up with selling pressures with its %d crossover above 80 level which is a bearish territory, while RSI has also been attempting to converge to the price dips right from the overbought zone which is a bearish indication and signals strength in its bearish sentiments.
On a broader perspective, we had stated in our recent post that “the major downtrend resume after failure swings below 38.2% Fibonacci retracements, every upswing is restrained below 7EMA”, the trend has exactly acted as per our whims and fancy (refer monthly chart for its bearish effects).
But for now, we call for most likely bullish engulfing candle pattern in this month’s candle with just one day to spare. Thereby, the major downtrend has been drifting in the consolidation phase since October 2016.
You could observe bulls on this timeframe have taken support at 23.6% Fibonacci level from the lows of 1.5665. Well, this pattern is not isolated but coupled with both RSI as well as stochastic curves’ bullish convergence to the consolidation phase. But MACD remaining bearish trajectory is yet to confirm this bullish indication.
Well, overall, we conclude by stating expect minor hic-ups in short run, while long-term traders wait for the better clarity.
The concession on Brexit transition would happen at the EU summit in October, where leaders may discuss changing the mandate of chief negotiator Michel Barnier to allow him to talk about the bridging arrangements alongside the divorce, according to the people.
Even with uncertainty over Brexit negotiations ongoing, the GBP gained in September due to the Bank of England (BoE) signaling a rate hike on the back of increasing (core) inflation.
Hence, we recommend shorting rallies on hedging grounds and decide to initiate shorts in futures contracts with near-month tenor.
At spot reference: 1.7085, contemplating lingering bearish indications, on hedging grounds we recommend shorting near-month month futures as the underlying spot FX likely to target southwards in near run.
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 has turned into -45 (which is mildly bearish), while hourly AUD spot index was at shy above -119 (highly bearish) at 13:01 GMT. For more details on the index, please refer below weblink: