The British Pound came under pressure today, key support line holds
The British currency has managed to stabilize in late New York trading with the pound holding above 1.6370 as of writing. Major data releases from the UK are scheduled for Friday, so traders can take a breather tomorrow and reassess the situation. We would be buying daily calls on dips towards 1.6340-50.
Prices of the binary options forex pair have hit the low marked in the first trading days of 2014 just below 1.6340, however they subsequently rebounded to current levels above 1.6370. We maintain a view that the pair is likely to consolidate somewhat before correcting ahead of UK Retail Sales figures on Friday.
Factors that will surely influence the move tomorrow are more US dollar related and risks include the release of the Consumer Price Index at 13:30 GMT tomorrow. We are of the opinion that a strong number is more likely than a week one, so caution is advised.
Our trade will be invalidated if prices drop below 1.6320 on a sustained hourly basis. That would trigger a deeper move towards 1.6300 initially and 1.6270 as a continuation. Having this in mind we will be buying puts to hedge our position in case the break occurs.
Most of the key data points are behind us as the consumer price index from the UK came lower than expected yesterday. This was the primary reason behind the pound's drop.
Looking ahead if today's daily low just below 1.6330 holds, we see a test of the figure above at 1.6400 followed by 1.6470 as the stronger level on the upside. Current levels are the center of the range that we believe will persist through the Asian trading session.
If you are more aggressive in your trading you could try to buy hourly calls at 1.6350, however do not consider this text to be a recommendation to do so. Only high risk players are entitled to trade markets on an hourly basis and we do not recommend it.