GBP/USD drops from weekly hurdle towards 1.4100 amid options market flip-flops, Brexit woes

GBP/USD grinds lower around 1.4145, down 0.12% intraday, heading into Monday’s London open. In doing so, the cable fades Friday’s bounce off monthly low amid mixed concerns relating to the options market players as well as risk catalysts, mainly relating to Brexit.

The expectations that US President Joe Biden will back European Union (EU) over the Northern Ireland (NI) protocol join the uncertainty over the Fed’s next move to weigh on the market sentiment. The same put a safe-haven bid under the US dollar and drags the GBP/USD prices. Furthermore, doubts over the UK’s June 21 unlock deadline also drag the quote.

On the same line were dwindling risk reversal. After snapping a two-week run-up by the May-end, GBP/USD risk reversal, a measure of the spread between call and put prices, again turns positive with a +0.025 level. However, the daily print again turns red on Monday, suggesting escalating bearish bias of the options market traders.

In addition to the fundamentals and options market signals, the pair’s U-turn from a one-week-old falling trend line amid receding bullish bias of the MACD also keep GBP/USD sellers hopeful.

Though a horizontal area from May 19 and 200-SMA, respectively around 1.4100-4090 and 1.4050, will challenge the pair’s further downside.

Meanwhile, an upside clearance of 1.4165 trend line hurdle should trigger the run-up to the monthly peak, also the highest since April 2018, near 1.4250.

Overall, GBP/USD bulls struggle around the multi-month top but aren’t out of the woods.

GBP/USD four-hour chart

Trend: Pullback expected