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May 18 - 05:00 PM

GBP/USD - Big Fibo And Option Barriers Key To Deeper Declines

By Richard Pace  —  May 18 - 02:35 AM
  • GBP/USD extends recent losses to 1.2075 Monday - new low since March 26

  • Big support looms at 1.2031 - 50% Fibo of 1.1413-1.2648 Mar-Apr recovery

  • Dealers also tout 1.20 option barriers, break could fuel more short cover

  • Those with exposure to barriers profit while spot trades above this level

  • Implied volatility higher - means options recognise actual volatility risk

  • But yet to add much more volatility premium for downside protection

  • Could mean risk of deeper GBP/USD losses perceived to be limited for now

  • However, recent flows do show Brexit concerns after June 30 nL1N2CW0E4



GBP=D3 Click here

Source:
Refinitiv IFR Research/Market Commentary

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