The Pound is ready to make another test higher
The British pound has had quite a volatile day today, although we are kind of getting used to the fact that volatility is back to the forex market. It all started quietly in Europe with the GBP/USD binary options forex pair hovering above 1.6600.
We had an important GDP data release from the UK at 09:30 GMT and despite the fact that the number came out largely as expected, Sterling has dropped sharply triggering stops below 1.6550. New buyers emerged around 1.6535 and have pushed prices higher.
In the afternoon we had a busy data release schedule from the US. Durable Goods orders came way below forecast, but since that number is generally volatile we wouldn't pay too much attention to it. With the positive consumer sentiment number released afterwards we are firm in our belief that the FED will taper tomorrow evening.
So the main question is how do we play this - as you can see on our chart we are hourly call buyers around the 1.6530-35 are and would be daily call buyers if we break above the red diagonal line drawn through Friday's and today's tops.
However if we see an hourly close below 1.6530 we would be definitely considering to buy puts on any rally. Have in mind that tomorrow is a Federal Reserve announcement day, so around the release at 19:00 we expect big volatility.
An important data release is on the line in the UK too with Nationwide's House Price Index coming out at 07:00 GMT being expected at +0.6% month on month. If we see a good number this could rapidly turn into a serious rally for the UK currency.