Pound Range Benifits From Waning Event Risk, Liquidity

The GBPUSD was recommended as the short-term pair to range trade on Thursday in DailyFX+ and current positioning makes it one of the optimal candidates for range trading for the week ahead. Much of the heavy event risk from both sides of the pair crossed the wires last week. What’s more, adding to the notable lull in scheduled event risk, the extended Thanksgiving weekend in the US should further sap liquidity and could dampen volatility in turn.

Trading Tip – The GBPUSD was recommended as the short-term pair to range trade on Thursday in DailyFX+ and current positioning makes it one of the optimal candidates for range trading for the week ahead. Much of the heavy event risk from both sides of the pair crossed the wires last week. What’s more, adding to the notable lull in scheduled event risk, the extended Thanksgiving weekend in the US should further sap liquidity and could dampen volatility in turn. If major moves are not the order for the week, technicals should hold firm. Our suggested strategy of a GBPUSD short would keep with both the developing, medium term down trend and the pair’s recent return to its congestion zone. We are taking this trade with a wide stop to protect against whipsaws. At the same time our target leaves us with a risk/reward ratio close to 1:1, which will place the success of the strategy not on the basis of a home run profit factor, but instead on the edge of the range.

Event Risk UK and US

UK – The UK calendar will remain relatively quiet in the days ahead, with few noteworthy reports due until next week’s Bank of England Minutes from its most recent meeting. In the meantime, Rightmove House Prices have an off-chance of forcing volatility in GBP pairs. Given a clear focus on housing performance, traders may look to trade off of any particularly large surprises in the result. Otherwise we will look to the BoE minutes to drive major moves in the GBP. The later second revision to GDP may likewise bring some volatility to Pound pairs, with any significant revisions to potentially shift sentiment for future growth.

US – The US economic calendar is limited to relatively second-tier economic data for the coming holiday-shortened week, except to note the key release of Minutes from the October 31 FOMC meeting. All eyes will turn to the Fed text to gauge the likelihood of a further interest rate cut at the central bank’s December 11 meeting. Today’s speech by Fed Governor Richard Kroszner suggests that we will see a much more hawkish text than current interest rate expectations have priced in. As such, it will be very important to watch how rate expectations shift in the wake of the report—especially as it is likely to drive large moves in the US dollar. 

Written By: John Kicklighter and David Rodriguez, Currency Analysts for DailyFX.com