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Converging Technical Levels Makes EUR/GBP Scalping Target

Converging Technical Levels Makes EUR/GBP Scalping Target

2010-07-29 15:20:00
John Rivera, Currency Analyst
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The Euro and Pound have continue to find support as signs of sustainable growth in the region and dissipating concerns over the banking system and sovereign debt have spurred bullish sentiment. The EUR/GBP has started to consolidate as the stalemate between the currencies continues. A gain in U.K. consumer credit and a less than expected decline in mortgage approvals have added sterling support. Meanwhile, European economic confidence rose to the highest level in two years as strong demand for exports fuel optimism. Therefore, we could see the pair continue to trade sideways until one economy distinguishes itself from the other, making the pair a scalping target.

Key Technical Levels

Declining Trend line Offers target levels

SR_10-07-29_body_Picture_1.png, Converging Technical Levels Makes EUR/GBP Scalping Target

Charts created using Strategy Trader– Prepared by John Rivera

The EUR/GBP’s 20 and 50-Day SMA’s at 0.8291 and 0.8376 respectively are converging and have provided support and resistance levels. Price action has remained confided between the technical levels providing target level for traders. A descending trend line has also limited upside potential and also generated opportunities to enter and exit positions.

Converging SMA’s Confining Price Action

SR_10-07-29_body_Picture_2.png, Converging Technical Levels Makes EUR/GBP Scalping Target

Charts created using Strategy Trader– Prepared by John Rivera

Key Support/ResistanceLevels to Watch

Pair

S/R

Level

Spot

Valid Since

Market Influence

CAD/JPY

Support

20-Day SMA

84.03

07/22/10

Low

EUR/USD

Resistance

38.2% Fibo of 1.5141- 1.1877

1.3120

05/04/10

Moderate

USD/CAD

Support

100-Day SMA

1.0305

06/23/10

Moderate

Quantitative Metrics

The EUR/GBP’s volatility has significantly quieted as both currencies continue to benefit from the same fundamental drivers. An ATR of 78 pips places it at the bottom of the most traded pairs, making it an attractive scalping target. The Bollinger band has started to widen following a bullish rally but at 358 pips, its level of variance is acceptable for a high frequency trader.

A Widening Bollinger Band and Declining ATR Gives Mixed Signals

SR_10-07-29_body_Picture_3.png, Converging Technical Levels Makes EUR/GBP Scalping Target

Charts created using Strategy Trader– Prepared by John Rivera

Volatility / Activity Indicators

EURUSD

GBPUSD

USDJPY

USDCHF

USDCAD

AUDUSD

NZDUSD

GBPJPY

EURJPY

ATR(14)

0.0142

0.0155

0.8700

0.0117

0.0127

0.0133

0.0108

1.9417

1.6406

ATR%

1.09%

1.00%

1.00%

1.12%

1.22%

1.48%

1.49%

1.43%

1.44%

20-5 Day SMA

-0.0201

-0.0260

0.2787

0.0007

0.0083

-0.0221

-0.0157

-1.8428

-1.4050

Boll. Band Width

0.0700

0.0703

2.5873

0.0251

0.0435

0.0782

0.0582

5.7072

5.0372

1 wk Implied Vol

10.8700

9.8225

10.6100

10.0425

9.9850

13.0950

13.2050

14.2200

13.9500

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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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