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EUR/GBP Bounce Alleviates Oversold Condition

  • Day's gradual pullback in GBP/USD continues into NY Hours, with spot printing new daily lows at 1.2378. No meaningful support seen until the May 25 low at 1.2308 and the 100-dma of 1.2303, with option interest sitting just below the spot price for today's NY cut at $1.2375 (Gbp300mln set to roll off).
  • The bounce in EURGBP also helping press GBP toward the bottom-end of the G10 pile despite still steady expectations for further BoE rate rises: BoE-dated OIS has nudged higher, with terminal policy rate pricing now at 5.48%.
  • We wrote last week that EUR/GBP had entered technically oversold territory - today's bounce has helped alleviate that condition, putting the 14d RSI back above 30.
  • GBPUSD is seeing healthy FX hedging volumes, with downside protection helping buoy overall options notional. Just under $3 in puts have traded for every $2 in calls, with 1.21 and 1.22 strikes seeing early interest.

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