GBP/USD - 1.39 on the cards?
- GBP/USD chewed through a key resistance zone on Friday.
- CME data show max additions in 1.39 strike call option.
- Technicals favor further upside.
Having defended 1.35 levels since the beginning of the year, the GBP/USD chewed through strong resistance in the 1.3659-1.3710 area on Friday and closed above 1.37 for the first time since June 2016.
The strong move upwards seems to have revived interest in the GBP/USD calls. The CME data for GBP/USD February expiry options shows the open interest/open positions in call options rose by 1526 contracts on Friday. Meanwhile, the open interest in put options increased by a mere 408 contracts.
What's more interesting is that open interest at 1.39 strike call went up by 754 contracts. Also, additions were seen in 1.3950 call, 1.40 call and 1.4050 call. The numbers indicate the investors could be betting on a further upside in the pair, possibly towards 1.39 levels.
That said, the rally is also backed by some positive news on Brexit front. On Friday, a report said Dutch and Spanish finance ministers had agreed to work for a Brexit deal that would keep the UK as close to Europe as possible. Adam Button from AshrafLaidi.com says, " This is a potentially huge development as it's the first crack in the united EU front against Britain."
Also, technical charts favor further gains. As of writing, the currency pair well bid at 1.3735 levels.
GBP/USD Technical Outlook
Valeria Bednarik, Chief Analyst at FXStreet writes, "In the daily chart, technical readings support additional gains ahead, as the price bounced sharply from a now bullish 20 DMA, while technical indicators turned north almost vertically, now near overbought levels. In the 4 hours chart, technical indicators have partially lost their upward strength within the overbought territory, but are far from suggesting a downward movement. Below 1.3690, a correction is possible, but buying interest should re-surge around 1.3655, 2017 high.
Support levels: 1.3690 1.3655 1.3610
Resistance levels: 1.3745 1.3785 1.3820