The GBP/USD has consolidated the post GDP losses and may see limited volatility going forward with the looming BoE rate decision. The unexpected third quarter contraction raised the chances that the central bank will add to their asset purchase program. Policy makers have already targeted the meeting as they look to make an informed decision with the quarterly inflation report in hand and the completion of their QE program. Therefore, markets may be content to stay range pound with the uncertainty surrounding future monetary policy, making the pair one for scalpers to target.
Key Technical Levels
The 50-Day SMA has held as support and provides a solid level for scalpers to target for entering and exiting positions. The 100-Day SMA also resides in the current range and to a lesser extent should be monitored. There has been an increase in volatility today but the pair remains in its current 200 pip range. A break above or below the bounds of 1.6450 and 1.6250 would be a signal for short-term traders to stand aside.
Quantitative Metrics
A Bollinger Band width of a 1000 pips is a big red flag for scalpers and a product of the recent volatility the GBP/USD has been experiencing. However, we have started to see the daily ATR decline following the sharp post GDP decline and was one of the few pairs that saw a reduction in its daily range and implied volatility from yesterday.
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To discuss this report or be added to the email list, contact John Rivera, Currency Analyst: jrivera@fxcm.com
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