The EUR/GBP has started to consolidate as bearish Euro sentiment has taken a break with markets waiting to see the reaction to the scheduled bond auctions from Italy, Portugal and Spain. Japan throwing its support behind European sovereign debt has raised the prospect that we could see successful offerings which could see traders remain on the sidelines. Sterling has also become directionless as markets continue to weigh the prospect of declining growth against an improved outlook for a BoE rate hike. Therefore, with the central bank scheduled to make a decision on future monetary policy this Thursday, we could see price action remain muted.
Key Technical Levels
A short-term 50 pip range has developed between 0.8290-0.8340 which is creating an ideal scalping environment and providing target levels. A long-term rising trend line is offering support and has helped slow bearish momentum. The pair’s separation from its converging SMA’s is making a bullish case and limiting downside risks. However, there are very little solid support and resistance targets for the pair which is increasing risks. Therefore, a break of the range would justify a corresponding short or long position.
Key Support/ResistanceLevels to Watch
Pair | S/R | Level | Spot | Valid Since | Market Influence |
CAD/JPY | Resistance | 200-Day SMA | 84.26 | 06/23/10 | High |
EUR/USD | Support | 61.8% Fibo of 1.1878- 1.4282 | 1.2798 | 09/13/10 | High |
GBP/USD | Resistance | Declining Trend line | 1.5570 | 11/05/10 | Medium |
Quantitative Metrics
Despite recent consolidation, the EURGBP’s Bollinger band width has widened to 570 pips following the sharp bearish move to start the year. The pair’s level of variance ranks near the top of the most traded pairs. However, intra-day volatility outside the four day slide has been muted which is reflected in its ATR of 77 pips, providing confidence that the pair is a solid scalping target.
Volatility / Activity Indicators
EURUSD | GBPUSD | USDJPY | USDCHF | USDCAD | AUDUSD | NZDUSD | GBPJPY | EURJPY | |
ATR(14) | 0.0129 | 0.0141 | 0.6500 | 0.0114 | 0.0078 | 0.0090 | 0.0083 | 1.1883 | 1.1294 |
ATR% | 1.00% | 0.91% | 0.78% | 1.17% | 0.79% | 0.91% | 1.10% | 0.92% | 1.05% |
20-5 Day SMA | 0.0173 | -0.0021 | -0.1864 | -0.0106 | 0.0089 | 0.0072 | -0.0044 | -0.4530 | 1.1829 |
Boll. Band Width | 0.0559 | 0.0376 | 3.5753 | 0.0476 | 0.0318 | 0.0430 | 0.0497 | 6.7872 | 5.3053 |
1 wk Implied Vol | 11.7700 | 8.9425 | 9.5650 | 11.6375 | 8.2600 | 12.3250 | 12.1450 | 11.0100 | 11.9150 |
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