Under most circumstances, ranges founded over a longer period draw more interest and offer the greater payout – though this comes at the expense of jumping in towards the end of the congestion and a much longer holding period.
[B]Why Would GBPUSD Hold a Range?[/B]
[B][/B]
· [B][U]Levels to Watch:[/U][/B]
[B]-Range Top: 1.6600 (Double Top, Fib)[/B]
[B]-Range Bottom: 1.6200 (Trend, Fib, Range, SMA)[/B]
· Congestion is a relatively unusual sight for the typically volatile GBPUSD. However, a stalled trend is not a surprise when fundamentals are taken into consideration. Both the UK and US are suffering the same economic and financial biases. The US recently saw seven of those banks that were put under the Fed’s stress test receive credit rating downgrades. For the UK, officials are trying to avoid EU oversight and stabilize public debt levels.
[B][/B]
· While a clear range has developed from GBPUSD price action, it is a [relatively recent pattern](http://www.dailyfx.com/story/bio2/Dollar_Marks_Time_Before_Next_1245333448011.html). Looking back more than two weeks, we can see that there is bullish trend carved out in the past few months. The support on our recent range activity coincides with this trend, fib confluence and the 20-day SMA at 1.62. Resistance is comparatively light.
[B][I]Suggested Strategy[/I][/B]
[B][/B]
· [B][U]Long[/U][/B][B]: Half-sized entry orders will be placed at 1.6240, a level which falls within recent lows.[/B]
· [B][U]Stop[/U][/B][B]: An initial stop of 1.6120 gives a decent buffer should a support level turn into a zone. To secure profit, move the stop on the second lot to breakeven when the first target hits.[/B]
· [B][U]Target[/U][/B][B]: The first objective equals risk (120) at 1.6360 and the second[/B][B] target will be 1.6480. [/B]
[B]Trading Tip[/B][B] – Under most circumstances, ranges founded over a longer period draw more interest and offer the greater payout – though this comes at the expense of jumping in towards the end of the congestion and a much longer holding period. The highlighted pattern in GBPUSD changes things around. The range between 1.62 – 1.66 is relatively new and reasonable targets can be met within a single day. Therefore, our strategy will look to approach this setup a little differently. Timing is key. With a clear trend channel dominating the chart; a breakout is likely to develop soon. As such, our orders will be closed by the afternoon hours of Friday’s US session (when liquidity really thins out for the weekend). Since the medium-term bias is bullish, we are only interested in playing support (the risk tolerant could attempt a short around 1.6450). Our levels call for an aggressive entry, offer a wide buffer to false breaks and present targets that are easily achievable with 24 hours. However, to accommodate this trade setup, we have to cut position size to regulate notional risk on the position. While we work with the current range conditions, it will be important to further [prepare for the inevitable breakout](http://www.dailyfx.com/analyst_picks/index.html). There are few notable indicators to spur impressive momentum; but a true shift (especially bearish) could redefine a trending market. [/B]
[B]
Event Risk for UK and US[/B]
[B]UK [/B]– Event risk for the United Kingdom is exceedingly light over the coming week. On the docket, only a couple of housing indicators and a proprietary retail activity gauge have any history of generating volatility. The Rightmove prices report will be used to benchmark speculation that the severely depressed housing sector is indeed coming off of its worst pace of the recession. BBA home loans however could be the more meaningful piece of data as it monitors sales activity and the health of credit through mortgage activity. The CBI Distributive Trades report will offer timely measure of retail activity; but its proprietary nature will naturally buffer its influence over price action. Outside the confines of the docket, risk trends will no doubt play into the pound’s direction. Though rates in the UK are among the lowest in the industrialized world (and projected to stay that way for some time) and its financial health is perhaps the most tumultuous; the market still treats it as a risk-appetite beneficiary. Should optimism perk before the week’s end, it could draw put the sterling on the rise.
[B]US [/B]– Risk appetite has recently eased off the US dollar; but that does not mean the currency’s safe haven status has been put on hiatus. Greenback traders will have to watch the evolution of sentiment over the coming week to derive a bead on the dollar’s bearings. At the same time, the correlation between the currency and underlying fundamental theme will have to be monitored to understand how direct the relationship between the two will be. Looking at the milestones for event-driven volatility, there are a few big names on this coming week’s docket; but each will find itself relatively mute considering current conditions. Existing homes sales, durable orders and personal spending are all feeding into the slow-to-take ‘green shoots’ theory. The rate decision and GDP will see very few changes.
[B]Data for June 19 – June 26[/B]
[B][/B]
[B]Data for June 19 – June 26[/B]
[B]Date (GMT)[/B]
[B]UK Economic Data[/B]
[B][/B]
[B]Date (GMT)[/B]
[B]US Economic Data[/B]
Jun 21
Rightmove House Prices (JUN)
[B][/B]
Jun 23
Existing Home Sales (MAY)
Jun 23
BBA Home Loans (MAY)
[B][/B]
Jun 24
Durable Goods Orders (MAY)
Jun 24
CBI Distributive Trades (JUN)
[B][/B]
Jun 24
FOMC Rate Decision
[B][/B]
Jun 26
Personal Spending (MAY)