The Sterling has been retracing from its highest levels since 2010 in the past couple of sessions. We still see the upside trend intact, so we are looking for opportunities to buy some calls in this pair. Inflation data from the UK has not been very strong today, but this might be only temporary.
The chart says it all - the British pound has been falling since yesterday, however it has encountered strong bids around 1.6655-60 today after UK inflation data came out weaker than expected and caused the currency to sharply fall after the release at 09:30 GMT.
We are looking at levels between 1.6655 and 1.6675 as good opportunities to buy daily calls for expiration on Wednesday and that's what we are focusing our attention on. More aggressive players can try to buy the same calls at current levels that are around 1.6695.
Inflation data from the UK was reported at +1.9% year-on-year which is one basis point lower than the market expected. However we think that with recent rises in commodity prices this is not very likely to persist for a long time and numbers will gradually creep up.
This is why in our opinion the market has largely dismissed the weaker number and managed to reverse the decline that we observed in the first couple of minutes after the announcement. With the market continuing to punish the dollar as weaker manufacturing data from NY was reported we are looking at Wednesday for the next big move.
Tomorrow will provide us with the latest Employment figures form the UK and the minutes from the last Bank of England meeting. Inflation figures from the US and Federal Reserve speakers and minutes will also provide some heavy trading impetus for tomorrow's session in this binary options forex pair.
The alternative scenario that would trigger put buying is if we see a sustained hourly close below 1.6630. So far we are pretty far away from those levels, but with recent spikes in volatility it might not take very long to reach there. Stay tuned to our forecasts and congrats to all who managed to take a trade on our AUD recommendation yesterday! We seem to be a full 25 pips in the money for now!