The pound extended its bearish trend today as weaker than expected U.K. GDP figures showed that the economy is still saw a considerable contraction in the third quarter, while many of its G-7 counterparts saw a return to growth. U.S. existing home sales rose to their highest level in three years fueling bullish dollar sentiment and the combining factors pushed the GBP/USD to its lowest level since October, 12. However, prior to the volatility we saw the pair consolidate ahead of the vent risk and with tomorrow’s release of the BoE minutes we could see the same as it nears.
Key Technical Levels
The GBP/USD has broken below the 200-Day SMA which exposes considerable downside risks. However, after conquering such a monumental barrier, we could see traders hold off on increasing their bets until the minutes for the monetary policy meeting are releases. The central bank has left the door open for additional quantitative easing. The tally and commentary from the last vote to keep measures on hold could spell out the end for stimulus efforts. Additionally, low holiday column may not be enough to sustain the current bearish trend.
Quantitative Metrics
A Bollinger band width of 798 pips is a product of the one way price action that we have seen from the GBP/USD detracting from its attractiveness as a scalping target. Its ATR of 188 pips is among the highest of the most traded pairs and another red flag. The one metric making the case for the pair is a relatively low one week implied volatility reading of 9.2425 which is the second lowest of the pairs listed below
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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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