Tomorrow sees the release of the Services PMI for the UK where a figure of 58.1 is expected against a previous of 58.5, a small but notable reduction and something traders will be paying close attention to given the UK’s huge reliance on its services sector.
It will also be interesting to see whether tomorrow’s number follows today’s Construction PMI figures which did come in lower than expected.
Both of the above, of course, are due before the all important MPC official bank rate votes, BOE inflation report and interest rate decision on Thursday. This confluence of releases, together with the usual reduction in liquidity can make trading particularly tricky as volatility hits the markets. The hourly chart for cable is a great example of this where we have seen a number of volatility candles triggered, moving the price well outside of the average true range for the pair. Of course, volatility can be the trader’s greatest friend, and can deliver excellent trading opportunities, particularly in the faster time frames.
For cable traders however, today has been tricky, but for traders of sterling crosses things have been somewhat more measured, and none more so than in the eur/gbp – a hugely important cross for both cable and eurodollar traders. And here the picture of the hourly chart could not be more different with the pair delivering a nice breakaway from the volume point of control in the 0.7030 region. The breakaway earlier this afternoon has seen the pair produce a nice waterfall which took eur/gbp down to the support platform at 0.6900 from where is currently attempting to rise. And here too it was another text book example of volume price analysis in action, with the candle at the start of the US session confirming the weakness to come in this timeframe. Once again it’s a cross currency pair which delivers a more accurate and measured view of market sentiment and lower risk trading opportunities as a result.
By Anna Coulling
Charts from MT4 and Quantum Trading