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Cable May Be Rangebound, But The Cross Pairs Deliver

Cable May Be Rangebound, But The Cross Pairs Deliver

Today sees the release of the Services PMI for the UK where a figure of 58.1 is expected against a previous of 58.5, a small but notable reduction and something traders will be paying close attention to given the UK’s huge reliance on its services sector.

It will also be interesting to see whether today’s number follows yesterday’s Construction PMI figures which did come in lower than expected.

Both of the above, of course, are due before the all important MPC official bank rate votes, BOE inflation report and interest rate decision on Thursday. This confluence of releases, together with the usual reduction in liquidity can make trading particularly tricky as volatility hits the markets. The hourly chart for cable is a great example of this where we have seen a number of volatility candles triggered, moving the price well outside of the average true range for the pair. Of course, volatility can be the trader’s greatest friend, and can deliver excellent trading opportunities, particularly in the faster time frames.

EUR/GBP – 1 Hour Chart

For cable traders however, yesterday was tricky, but for traders of sterling crosses things have been somewhat more measured, and none more so than in the EUR/GBP – a hugely important cross for both cable and eurodollar traders. And here the picture of the hourly chart could not be more different with the pair delivering a nice breakaway from the volume point of control in the 0.7030 region. The breakaway during yesterday’s early afternoon saw the pair produce a nice waterfall which took EUR/GBP down to the support platform at 0.6900 from where it is currently attempting to rise.

Here too it was another textbook example of volume price analysis in action, with the candle at the start of the US session confirming the weakness to come in this time-frame. Once again it’s a cross currency pair which delivers a more accurate and measured view of market sentiment and lower risk trading opportunities as a result.

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