GBP/USD Options: Recovery likely to continue, eyes 1.34

Omkar Godbole FXStreet Contributor

The GBP/USD pair rose to a high of 1.3226, tracking the uptick in EUR/USD pair on the easing Catalan fears and broadbased USD weakness on fears that Trump's tax reform could be hitting a road block.

The spot was well bid in the Asian session today and clocked a session high of 1.3222 before falling back below the 1.32 handle in Europe.

Weekly chart

The chart shows-

The spot is back above the rising trendline with the RSI holding above 50.00 (in bullish territory).
Rounding bottom resistance at 1.3268
The 50-MA has bottomed out and is sloping upwards

The spot looks set to re-test the downward sloping weekly 100-MA seen at 1.3320. The options market seems to agree with the bullish technical outlook.

The preliminary data published by the CME for GBP/USD November expiry options show renewed demand for call options following a recovery from the last week's low of 1.3268.

Call Summary
Total		ITM		OTM
OI	Chg	OI	Chg	OI	Chg
33,575	1,375	3,773	0	29,802	1,375

Put Summary
Total		ITM		OTM
OI	Chg	OI	Chg	OI	Chg
29,580	388	15,713	18	13,867	370

The open positions/open interest in the Call options rose by 1375 contracts on Tuesday, while the open positions in the Put options increased only by 370 contracts. The bias is clearly bullish.

1.34 Strike Call added 900 contracts, taking the total open positions build up to 1.3224; the third highest among Call options. Highest buildup is seen in 1.33 Call and 1.32 Call.

View

The options market is clearly positioned for an extension of a rally to 1.34 levels as suggested by big additions in the 1.34 Call on Tuesday.
On the downside, 1.30 is likely to act as strong support.

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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