The Pound is likely to continue to rally... soon
The euro has been staging a rebound to the British pound in recent sessions and the EUR/GBP binary options pair has headed lower. However we feel that this corrective move is now drawing to a close and we have the opportunity to buy daily puts at levels above 0.8260.
We just had UK data hit the wires with unemployment figures that were not fantastic with the rate rising by 0.1% to 7.2%, however that shouldn't impact the British pound so much as the data is only mildly lower and we are firmly believing that UK data will rebound as the floods impact resonates.
The chart is showing is a substantial decline from previous week's highs with the EUR/GBP binary options forex pair failing around 0.8330 and declining all the way to 0.8160. Since the beginning of the week a rebound has been staged and current levels are closer to 0.8245.
This morning the pair tested last nights highs around 0.8353, however it failed to sustain an hourly close above these levels. It marked a new high at 0.8260 and we are looking to buy puts at current levels around 0.8248. Our alternative scenario would be a break and an hourly close above 0.8270.
The expiries that we have in mind are for today and tomorrow, however important data on Friday can have an adverse effect and put the pair into a tight range between 0.8260 and 0.8220. Only very bad Retail Sales data for the UK can push the GBP into oblivion.
For now the market is pricing in a decline of 0.9% already, so be careful if we get a report with anything even worse than that. Initial support around 0.8220 could stage a rebound and hold until Friday, so be prepared and stay on the sidelines even if you see an hourly break below.
What we are looking for is a rise of about 10-15 pips from current levels to purchase our strategic daily puts. Meanwhile stay tuned to the Federal Reserve's release of its monetary policy meeting minutes later tonight at 19:00 GMT. Volatility could come to the markets quickly as FED speakers occupy the newswires in a couple of hours.