Cable: Looking to range trade; volatility only going to increase
Plenty of risk factors at play in sterling, what with trade wars, Brexit, and a general feeling of impending panic as negative headlines impact many financial markets operators.
There is obviously some significant option protection ahead of 1.20 in cable and this needs to be respected. With quite a bit of space on the topside before strong technical resistance reemerges (1.24 is the next very strong level), we could easily see the market move towards there especially if the no-deal Brexit headlines take a breather.
GBP continues to look awful on the crosses against both the JPY and the EUR. Both look like clear cases of ‘sell-the-GBP-rally’ but exactly where that rally is will depend on the headlines and the volatility at the time.
So for now I am happy to trade the 1.20-1.24 cable range but lets put it this way, I’m more comfortable with bigger short GBP positions than bigger long ones!