GBP/USD risk reversals hit 13-month low, show strong demand for Puts

• The GBP/USD risk reversals fell to 13-month low of -0.9 yesterday.
• The GBP/USD hourly chart shows a bear flag breakdown – a bearish continuation pattern.

The GBP/USD one month 25 delta risk reversals fell to -0.90 yesterday – the lowest level since June 14, 2017.

The negative number indicates the implied volatility premium for GBP puts is higher than that of GBP calls.

The data indicate the investors are expecting a deeper drop in the GBP/USD on rising political uncertainty and hence are seeking downside protection (GBP puts) against long GBP/USD spot positions.  

GBP risks a bear flag breakdown

Hourly chart

Spot Rate: 1.3258

Daily High: 1.3283

Daily Low: 1.3249

Trend: Bearish

Resistance

R1: 1.3287 (resistance as per the hourly chart)

R2: 1.3342 (50-day moving average)

R3: 1.3363 (July 9 high)

Support

S1: 1.3213 (10-day moving average)

S2: 1.3102 (June 21 low)

S3: 1.3049 (June 28 low)