Going into tomorrow’s FOMC meeting, we look at our panel of trading indicators for GBPUSD. They include:

  • Trading Range: These ranges represent a trading bank within which a currency should trade based on multiple market factors. If we are long- prices above the upside range indicate the asset is expensive, and prices below the downside range suggest that they are cheap and vice versa if we are short.
  • Year-to-Date Returns: This is the price performance of a given currency over the course of the current calendar year, in percentage terms. We also compare the current price to the 52-week high and low for reference.
  • Price Momentum: This looks at cumulative rolling returns for a selected lookback period.  Positive momentum is good if we are long and bad if we are short. 
  • Implied Volatility Discount/Premium: This tells us what the market expects in terms of volatility relative to the history of volatility. If we are long a currency, we typically want market implied volatility to be higher than historical volatility and vice versa if we are short.

 

Going into tomorrow’s FOMC meeting, the GBPUSD looks a little expensive due to a recent jump. However, fundamental trends, medium-term momentum, and volatility seem to favor GBPUSD. The shorter-term indicators aren’t as positive- particularly our trading range and price relative to their 52-week highs. An ideal situation for entry is when all of these signals align, so while GBPUSD probably has upside, all our signals are yet to be triggered.