GBP/USD - Indecision on the charts, risk reversal at 2-month low ahead of Jackson Hole

GBP/USD clocked a high/low of 1.2837/1.2774 on Thursday before ending the day on a flat note at 1.2799 levels. The price action on the daily chart points to indecision in the marketplace ahead of the Yellen speech at Jackson Hole Symposium.

Daily chart

The chart above shows-

• Doji candle at the support offered by the trend line sloping upwards from April 10 low and June 21 low
• The bearish move appears to have stalled 1.2778 [38.2% Fib R of Jan low - Aug high] is offering support

The Doji candle at the confluence of the trend line support and the 38.2% Fib retracement support indicates indecision.

Risk reversal drops to 2-month low

Risk reversals are widely tracked as a gauge of financial market sentiment. It compares the volatility paid for out of the money calls versus out of the money puts. A positive number indicates increased demand for calls [bullish bets] and vice versa.

The fact that the one-month 25-delta risk reversal hit a 2-month low of -0.60 indicates the options market is hedged against a potential sell-off below the confluence of the rising trend line and 38.2% Fib retracement support.

GBP/USD Technical Levels

FXStreet Chief Analyst Valeria Bednarik writes, “the 4 hours chart for the pair shows that the early advance was contained by a bearish 20 SMA, while technical indicators in the mentioned chart have recovered from oversold territory, but remain below their mid-lines, limiting the upward potential of the pair. Given that the pair has set a lower low for the week, this time at 1.2773, the risk remains towards the downside, with the market still looking to test the 1.2700/20 region.”