Trading the GBP/USD into the UK GDP release tomorrow
Levels on GBP/USD closed Tuesday in NY at $1.5240 after having pulled back from a NY recovery high of $1.5288 to a low of $1.5233 before rebounding into the close.
Binary options traders during the NY session basically followed EUR/USD moves, with trade into Asia following the same pattern. Rate was initially pushed to a low of $1.5227 before it eventually pulled back up to challenge resistance at $1.5250.
Failure here prompted speculative longs to trim back their exposure ahead of the European open.
Extension of Stimulative Policies
The Bank of England and UK Treasury announced an extension to their Funding for Lending Scheme by one year to January 2015 this morning. The scheme will also be extended to involve some non-bank credit providers, the BOE and UK Treasury said. The aim of the extension is to provide further incentives to lenders to small and medium enterprises, which so far haven’t benefited much from the existing lending scheme.
There were rumors that the market in binary GBP/USD could see dividend demand emerge over the next four sessions (as a major UK oil company repatriates funds to pay dividends to its shares holders). Some buying did emerge and we expect it to provide some positive sentiment to the GBP/USD.
Key Demand and Technicals
Investors should be aware of Thursday's key release of Q1 GDP with most suggesting a pessimistic outcome which should provide some counter balance and a potential for a sharp drop in the value of digital options if fears materialize. Key levels are around 1.5285-90 and further up around the figure at 1.53. A break will open a move toward $1.5350 – a nice opportunity for call players. Support is now seen between $1.5220/30, with a break to open a deeper move toward $1.5190/1.5200. Support line from Mar 12 low and the Apr 22 is at $1.5198/5200/04. This key support level has held price action for the past two sessions while daily studies slide to project a move downward. A break below here could prompt a new trend lower, with next support seen at $1.5104.
All that said, binary options investors should really pay attention to the news release tomorrow at 08:30 GMT with the first quarter GDP expected at +0.1% over last quarter of 2012 and 0.3% higher than a year ago. This is likely the trigger for the next major move, so we advise caution with trading weekly options on this pair with the short term dominating the current framework.