Yesterday's steady retreat in EURGBP helped lift GBPUSD back above 1.3000
I had been highlighting yesterday's large EURGBP options expiries for a few days and they didn't disappoint, making a big impact on the day's trading on pound pairs.
We had already seen a dip below 0.9200 when weaker UK services PMI data sent GBPUSD down into 1.2900 and EURGBP briefly back above 0.9200.
It was to be a short-lived move though and from there on in it was a steady move to 1.3042 and 0.9133 as the short side of the option prevailed helped by a general perception that the ECB won't be delivering any hawkish bombs at tomorrow's meeting
I had suggested in my PMI post that GBPUSD shorts might want to take some profit and recreate higher and I hope some of you took heed. I further warned to keep an eye on both pairs as we headed toward expiry time with GBPUSD having 500m+ interest of its own at 1.3000. General USD supply gave the pair the extra impetus it needed to break higher.
So that was then. What about now? Well I've recreated some GBPUSD shorts above 1.3030 and will review/re-assess if we break 1.3050 initially to see if we might get a quick run into 80-00. Net short GBPJPY helps to hedge as USDJPY has now tested the 108.50 area that I had targeted in a few comments/replies on various recent threads and I stand by my view to sell rallies.
I've warned previously/recently that shorting GBPUSD in an environment that I expect the Fed not rush to hike rates was a play that had to be flexible and I had preferred to buy EURGBP . Yesterday's move was one I was generally happy to sit back and watch given the options influence but did take a couple of hits by jumping in too early.
EURGBP has previous support/demand between 0.9100-20 and that remains a decent line in the sand so let's see if there's energy today to have a look down there. I would be inclined to buy that dip but tomorrow's ECB meeting certainly merits caution even though I feel much of the lack of hawkish tones may now be/almost be factored in.
Mirror mirror on the wall,
