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EUR/GBP Range Creating Ideal Scalping Environment

EUR/GBP Range Creating Ideal Scalping Environment

2010-05-19 14:52:00
John Rivera, Currency Analyst
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The Euro and Pound have regained their footing after another sharp sell off for both which has left the EUR/GBP stuck in its current range. A German ban on naked short selling raised concerns that there are more underlining issues that haven’t yet revealed themselves. The release of the BoE minutes showed that the policy makers were unanimous in their decision to leave their benchmark rate and asset purchase program on hold. Several members of the MPC still see existing slack in the economy putting downward pressure on prices despite the CPI index accelerating to 3.7% in April. The dimming growth picture for both economies could see the pair continue to trade sideways or within its longer-term channel formation, making it the ideal pair fro scalpers.

Key Technical Levels

5-19-10SCALP-01

 The EUR/GBP continues to find resistance at the 20-Day SMA currently at 0.8590 which has led to the pair settling into a short-term range between 0.8500-0.8600. The technical level has also defined the upper bound of the longer term descending channel which the pair has been restricted to since early March.

5-19-10SCALP-02

Quantitative Metrics 

The EUR/GBP has seen its Bollinger band width narrow to 295 pips as the pair has settled into a short-term range. The daily volatility for the pair is also contracting as the ATR has fallen to 114 pips putting it at the bottom of the most active pairs. However, we are seeing one week implied volatility readings increase across the board which should be a concern for high frequency traders.

5-19-10SCALP-03

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