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GBP/USD Sales Could Prompt Pair to Resume July Downleg

  • GBP/USD fades to the lowest levels of the day into NY hours, putting prices further below the Monday low and narrowing the gap with the key Friday low at 1.2763. Today's move open a decent gap with the most sizeable options interest for the Tuesday cut at 1.2850-63 (£852mln).
  • Weakness through here would be bearish and mark a resumption of the downleg off the mid-July high - turning focus to 1.2733 and the lower 1.0% 10-dma envelope. GBP weakness is not contained to GBP/USD, with EUR/GBP gravitating back to positive territory in recent trade - but retaining the consolidation phase in the cross.
  • Options markets show decent interest in GBP/USD downside protection, with the most salient trades Tuesday including a sizeable 1.27 put strike expiring on Aug15 - thereby covering the BoE decision on Thursday and any subsequent market fallout. Put notional has far outweighed calls so far Tuesday, with $5 in puts trading for every $1 in calls via DTCC data.
MNI London Bureau | +44 203-865-3809 |
MNI London Bureau | +44 203-865-3809 |

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