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GBP/USD holds below 100-day MA, risk reversals flat lined

  • GBP/USD is mildly bid, but still trades below 100-day MA
  • Risk reversals move sideways, indicate indecision in the market

Currently, GBP/USD is trading at 1.3075 levels, having clocked a high/low of 1.3080/1.3059, respectively.

The currency pair failed to hold above the 100-day moving average on Friday, still managed to end the day in the positive territory at 1.3076, largely due to the weakness in the treasury yields. As of now, the 10-year yield is showing no signs of life, which explains the mild bid tone in the Cable.

BOE's Carney, while talking to ITV, said Britain's economy would take a hit if there is no Brexit deal. He added further that the central bank may not be able to cut rates in the event of a bad Brexit deal due to high inflationary pressure.

So far, Carney's comments have not had any impact on the yield differential and the GBP/USD pair. The 10Y UK-US yield spread remains flat lined around 107 basis points.

Risk reversals flat lined

The above chart shows the one-month 25 delta risk reversals and one-week 25 delta risk reversals remain flat lined, indicating indecision in the options market. A break below 1.30 or a convincing move above the 1.31 handle could revive bearish/bullish bias in the risk reversals.

GBP/USD Technical Levels

Brian Twomey from Brian's Investments writes - " From a daily perspective and for the week, GBP/USD must break 1.3130 then comes 1.3137. From averages 5 to 50 day, GBP is oversold and targets 1.3111 and 1.3134. Caution to shorts at 1.2962 and 1.2942 as long becomes the only trade."

" The bottom points for GBP/USD are located from trend line averages at 1.3067, 1.3020, 1.2993, 1.2962 and 1.2942. Below 1.1942 then the path is wide open to 1.2794, 1.2767, 1.2681, 1.2652 and 1.2643. Monthly average drivers are the 1 and 2 year at 1.2804 to 1.3285 and neither are overbought nor oversold."

"Upside break points are located at 1.3113, 1.3148, 1.3168, 1.3223 and 1.3344. Despite oversold from monthly averages 3 to 10 years, GBP/USD runs into solid  trend lines at 1.3343 and 1.3400's. GBP above 1.3223 and 1.3344 becomes out of bounds."

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