Range-Bound Pound (GBP)!
The British pound has been trading in a range for December as the drama of the European debt crisis has been weighing heavily on the markets. While the UK is not a member of the Euro zone nor do they use the shared currency, they are still part of the EU and are tied closely to the others through markets and the banking system.
The value of the Pound has been fluctuating much like the Euro as the uncertainty of the situation has induced various degrees of risk. However, when trading the range, there can be good opportunities to buy ahead of support and sell ahead of resistance as long as the range holds.
This morning, such an opportunity presented itself to buy the Pound ahead of 1.56 with a stop just below the daily S1 pivot support at 1.5568 with a hope that it returns to the top of the range at 1.5750. This trade would imply a nearly 3:1 reward/risk ratio which is acceptable for these type of markets.