Fundamental and Macro Drivers Behind Downside Momentum
We are seeing a clear turn in GBP/USD after it failed to hold above the 1.3470 level. This rejection lines up with recent UK GDP figures showing a meager 0.1% growth last quarter, underscoring a sluggish economy. As a result, short-term momentum has clearly shifted to the downside. Considering the increased risk of a break below 1.3390, we are looking at buying put options. A bear put spread, perhaps buying the 1.3400 puts and selling the 1.3300 puts for July expiration, offers a defined-risk way to target this move. This strategy benefits from the growing policy divergence, as the Fed remains hawkish following last week’s strong 225,000 Non-Farm Payrolls print.Strategy Considerations and Key Technical Levels
The 1.3470 level now acts as a strong ceiling, and we see an opportunity in selling premium around that area. A bear call spread, with a short strike around 1.3450, could be effective as long as that resistance holds. This view is supported by recent UK inflation data which, while easing to 3.1%, is not high enough to force the Bank of England into a more aggressive stance. This situation feels similar to the 2022-2023 period when aggressive Fed hikes outpaced the Bank of England, leading to significant sterling weakness. Therefore, we are closely watching for a weekly close below the 1.3300 psychological level. A break there could trigger a much larger move down towards the 1.3000 area.Start trading now — click here to create your real VT Markets account.
