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GBP/USD Range Continues To Generate Scalping Opportunities

GBP/USD Range Continues To Generate Scalping Opportunities

2010-05-26 15:05:00
John Rivera, Currency Analyst
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The pound continues to find a bid as risk appetite has returned to markets following yesterday’s sharp reversal at the end of the U.S. session. The European debt crisis has put markets on alert, but we may have seen an overreaction to the region’s problems which is the source for the current rebound in optimism. Nevertheless, a slowing Euro-Zone economy is a major negative for the U.K. but the uncertainty over the impact of government cuts home and abroad has left the GBP/USD range bound. The OECD calling for tightening from the BoE before year-end could also be providing support for the Pound and could potentially offset the headwinds from the declining outlook for growth.

Key Technical Levels

SR-10-05-26-01

The GBP/USD has settled into a range between 1.4250-1.4500 over the past week and a half which has created the ideal scalping environment. We have seen several tests of both bounds making them ideal targets for entering and exiting positions. Additionally, we have see formations like the current rising trend line which creates shorter-term targets for high frequency traders.

SR-10-05-26-02

Quantitative Metrics

The GBP/USD has seen its daily ATR slip to 230 pips and trending lower as the pair continues to consolidate. However, the level of daily volatility still remains near the top of the most active pairs. A Bollinger band width of 1380 pips should be a concern for high frequency traders as the pair has been in an extended bearish trend leading to extreme variance. The broader environment for scalping is improving as one week implied volatility readings have started to quiet.

SR-10-05-26-03

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