- GBPUSD likely to be confined until the vote
- Upper and lower boundaries provide clarity on range
- Currently in middle of range, need to wait for resistance or support before making any movies
The upcoming EU referendum is wreaking havoc on price action in GBP/USD, as both sides of the market react to various poll releases and speculate on the outcome of the vote. This is causing some wild swings as implied volatility in the options markets heats up. These swings may appear rather chaotic, but if handled properly as a trader they can be taken advantage of.
It’s likely a range-traders market until after the vote, so we will treat it as such until either the upper or lower boundary is fully breached. GBP/USD currently sits in the middle of the roughly 400-point range, which makes establishing a position here not ideal. First, the middle of the range doesn’t provide much directional indication. Secondly, there aren’t good reference points from which to determine stops and targets.
Monday’s gap lower and reversal off the lower parallel near the May trough presented a decent spot to enter, but that is past us now. So, we will either wait for a move back towards the high-end of the range around 147 or back towards the 144 level. These are approximate levels, so watching how price behaves once around those levels will be important. Blindly buying into support or selling into resistance is not the favored approach on this end; rather waiting for a reversal in momentum once a zone of support or resistance is met is the preferred.
Additional note: Be careful on holding positions or at least full-sized positons into the weekend.
Levels to watch:
Long: 14330/14400 (rising parallel may require support elevating above 14400)
Exits: For both sides of the tape we will look for moves to carry towards the other side of the range with the prior levels in focus as ultimate targets.
*Risk/reward should be around 1:2 or greater.
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX, and/or email him directly at firstname.lastname@example.org