FxWirePro: GBP/CAD Bounces Amid Bears Show at 1-Year Lows, Both Leading and Lagging Indicators Signal Robust Bear Trend
Despite the handsome recoveries in GBP/CAD from last two days, nothing much has changed to the major trend which is vigorously bearish, the current prices have still remained well below 21DMA.
In last five months, GBPCAD has shown declines from the highs of 2.0949 to the current 1.8185 levels, (i.e. almost 13.19% and a fresh 1-year lows).
The reiteration is that the pair has constantly been below 21DMA ever since mid of last January, that is when shooting occurred at peaks.
DMAs signal robust bear trend to prolong, leading oscillators absolutely indecisive, Good to capture rallies for shorts.
Hence, it has been testing DMA curves as a stiff resistance. Despite the attempts of upswings the current prices have well below 21DMA.
Leading oscillators have been converging to the prevailing downswings, the current RSI is trending below 31 and Stochastic curves have halted in oversold territories but no traces of buying indications.
MACD remained below zero levels indicates long term trend healthiness, which is one more downtrend continuation signal.
Overall, the major downtrend seems intact as the both leading and lagging indicators converge the ongoing slumps on monthly charts.
So, how to deal with this puzzling trend – credit call spread to speculate
Since, we’ve been seeing the minor spikes every now and then in this major downtrend, profit maximization could be possible through some leveraged derivative products, below is such strategy.
Thus at spot ref: 1.8264, it is good to go short in 1W (1%) ITM call positive theta and delta closer to zero, and simultaneously go long in 2W (1%) OTM 0.37 delta call with net credit to enter this trade (both sides use European style options).
Trade expects that the underlying spot FX price would drop to ITM strikes on short expiration and thereafter any bounce back would be arrested by long positions with longer tenors.