FxWirePro: Should We See Sterling Further Breakdown - Fx Swaps Strategies

FxWirePro: Should We See Sterling Further Breakdown - Fx Swaps Strategies

We’ve shifted back to the top of the recent range as UK’s claimant count change and unemployment data announced today, Change in the number of people claiming unemployment remained at 6.7K -related benefits during the previous month, while unemployment rate remained unchanged at 5.1%.

As a result, GBP/USD a move through 1.4393 resistance is needed to open more important resistance around 1.48.

Otherwise we project the range to hold, with 1.4250/40 pivot support ahead of the 1.40-1.3835 range lows.  

Medium term, we expect the market to continue to trade a range between 1.3850-1.35 support and 1.45-1.48 resistance.

Should we see a breakdown through 1.40, then we have little in the way till meaningful support in the 1.4229 region. 

Receive the belly of the level adjusted 1Y/1Yx1Y/2Yx1Y GBP swap fly. Stay neutral duration. Keep paying the belly of the 2s/5s/10s gilt fly (50:50).

Keep 5s/40s swap curve steepners. Gilt 1H21 and 1H26 auction previews.

Take profit on short belly 4H34/4Q40/3Q44 cash and duration neutral fly.

Keep 4Yx1Y GBP/USD cross currency basis widener, bias for a flatter 5s/10s GBP swap spread curve.

Stay short 3Mx2Y gamma and long 6Mx10Y gamma.

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