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GBP/USD Range Creates Ideal Scalping Environment

GBP/USD Range Creates Ideal Scalping Environment

2010-05-24 14:46:00
John Rivera, Currency Analyst
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The Pound has started to trade sideways as markets wait to see what the course of action from the new government will be going forward. The pound rose in early trading as the U.K.’s Chancellor of the Exchequer George Osborne outlined budget cuts to shrink the budget shortfall. However, the country faces considerable pressures with the issue sin the Euro-zone adding to the existing slack in the economy. Therefore, we may see the sterling remain range bound as markets assess the potential impact of the new government measures creating the ideal scalping environment.

Key Technical Levels

SR-10-05-24-01

A longer-term descending trend line has offered support for the GBP/USD and could limit short-term downside risks. Lack of conviction in either direction has left the pair range bound between 1.4250-1.4500 creating solid target levels for entering and exiting positions. A break of either bound could lead to an extended breakout and traders should position themselves accordingly.

SR-10-05-24-02

Quantitative Metrics

The GBP/USD’s Bollinger band width continues to be one of the largest amongst active pairs at 1475 pips. However, we have started to see signs that it is beginning to narrow with the upper bound turning inward. The pair’s ATR of 233 pips is also concerning fro high frequency traders but it has also showed signs of decreasing as the pair settle into a range. Additionally, we have seen one week implied volatility readings decline across the board as fears over Europe have started to fade.

SR-10-05-24-03

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