The nearest levels
Currency pair Pound- Dollar (GBP/USD) is one of the key assets in the foreign exchange market. About 12% of all trading operations are accounted for this pair. As a result it ranks second in rating of the most popular currency pairs. The key features in trading GBP/USD are considered in this article with regard to properties and features.
As mentioned above the pair GBP/USD is quite popular among traders. It’s naturally because pound and dollar are not the “last” currencies in the world. Above currency pair is one of the “hardest” assets that are analysed very difficult. Keep in mind that most of book’s author on trading, most of trainers, consultants and analysts say that rookies shall not trade with pound/ dollar or it’s possible to lose everything. Why is it so? There are a range of performances of above asset that reply on the question. Thus, currency pair pound/dollar пара:
- It possesses with high volatility. It passes 130-180 points per day and it’s not a limit for this currency. It is mobile during operation of Royal Exchange especially.
- It has small volumes. It’s surprising, but there are no large volumes of funds (even in pending orders) and for a long term. Generally scalpers operate with this pair, volatility and unpredictability are out of here. Remember please the "black Wednesday" 1992, when Soros with his fund has pulled down British currency alone.
- The pair prones to sharp turns. It is quite normal for this pair when a price flies up and then falls down in some minutes.
Please pay your attention on candlesticks that form the chart (period is 1day). 98% candlesticks have a distance more than 100 points from a peak to a low. The distance is more than 150 points in 60% of cases at all. This is the volatility as discussed in article. Thus what it give traders and how to use it. It is important to realize that price range is not uniform within 24 hours. Main activity accounts for European европейскую (American in part) session. The asset is more or less quiet during Asian session operation. Pay your attention on the figure below where chart is shown built for period 1 hour for illustration.
Cyclical nature is visible by naked eye. For this reason it has often been said that rooky shall use "£-$" for Asian session.
Tendency to sharp turns
Sharp turns are that scares a lot of traders within this asset. It is important to realize that these turns are unevenly distributed in time and they occur during European and American trading sessions. Please pay attention on the figure below.
It is evident how sharply he price changes direction from side to side. It is important sharply in particular. That’s why many traders wait for start of correction and open trades in the line of this correction. They realize that the asset prones to impulse.
Correlation with other assets
Correlation is one of the properties of any underlying asset. Especially as we discuss the foreign exchange market where everything is closely bound up . The pound specificity character in that it interacts with other currencies very sluggish but there are pointed common factors:
- EUR/GBP. As a rule this asset has fully reversed correlation.
2- EUR/USD. Correlation is not so apparent but these assets often move in one direction. It follows that USD/CHF will have the inverse correlation.
3-USD/CAD. Tendency is not the very apparent but inverse correlation is often observed when pound/dollar currency growth is followed by USD/CAD falling.
It is important to realize that all correlations are brittle because the British currency is very independent. Therefore you decided to trade with correlation of currency pairs it shall be checked constantly because there is the correlation exists and it may be absent in some minutes.
Important economic news
The rate GBP/USD is affected by external economic news like any other asset. They shall be taken into account in trading necessarily. The following news are marked:
- Gross domestic product is a key economic factor. It should be taken into account GDP in England and USA in this case because these currencies are included in quotation. At that this news is applied in very rare cases because the market responds intensively but with delay as a rule .
- Interest rate. It should be taken into consideration Bank of England decision of interest rate as well as FRS statement. This news is very intense and has a strong effect on the market.
- Inflation. This index is not submitted in the pure state in economic calendar but it is described with such news as Consumer price index as Producer price index.
This list can be continued but there is no sense because the economic calendar should be used in any case. The calendar should be studied every time before trading start. If you wish to use the pair GBP/USD you will look for all news coming from England and USA. Euro area and Canada influence over the asset partially.
The currency pair pound/dollar permits to use a graphical analysis with characters as the other assets. But there is not uniquely here as with other currencies because the pound sharp motion often results in false breakout and outputs for lines. On the other hand if you teach yourself to monitor these false outputs you’ll be able to use the asset fairly profitably.
Triangles, long squares, lines are visible in the figure. As you can see all that operates but still the false outputs are in the figure. That’s why you will face up any similar signal may be false one with opening position. In this case you should be ready for losses which shall be covered on other trades .