Factors Affecting the Movement of the USD/GBP
Obviously, what is happening in the UK and the US will affect the behavior of this currency pair the most. In the US, the announcements made by the Fed (Federal Reserve) will often have the greatest impact on the dollar.
In the case of the UK, the BOE (Bank of England) usually has the greatest influence on how the pound changes its value over time. Consequently, as you trade the USD/GBP in the binary options market, it is important to have your finger on the pulses of these economies by following important news releases closely and in a timely manner.
The best approach is to have some knowledge of each country’s economic calender so that you know when to expect significant news items. There are usually time lines indicating when the next significant news reports will be released.
And experts will usually have approximate figures and opinions on what these reports will be like. All this information will be important as you trade this currency pair because at the end of the day, expectations are what determine what direction a currency’s value will go.
These financial bodies will release information detailing how the economies are doing with regard to employment, various market indices, GDP, inflation rates and the like. The decisions they make regarding the economy, for instance with respect to the monetary policy or interest rates will also cause notable movements in the value of each country’s currency.
It should also be pretty obvious by now that this currency will be most active during the European and the US sessions. News releases such as the NFP (Non-Farm Payrolls) data from the US and job growth data from the UK cause the most significant short term movements in the price of this currency pair during these trading sessions.
The Euro also Matters
Another thing to watch out for is the behavior of the euro. Although the UK has always opted to avoid using the euro; and has recently decided to separate itself from the region economically, it is still strongly linked to the economic happenings of the region.
Consequently, you can expect that certain economic changes in the Eurozone will spill over to the UK and have some noticeable effects on the pound. The UK is a major EU trading partner, and that means that the two economic powerhouses are somewhat linked.
So, it might not hurt to follow the euro in order to have a better insight into the way the pound will behave. Major economic issues in the EU tend to affect the UK; and this is reflected in form of inflation rate changes, and changes in the labor market or the manufacturing industry among other key economic markers.
The Impact of UK and Tokyo Sessions
The UK session and the Tokyo session also tend to overlap for an hour (between 0300 and 0400 EDT). And while USD/GBP currency pair has no direct link to the economics of the Japanese yen, the trading activity that typifies the period between 0200 and 0500 EDT can bring with it some interesting price movements in the USD/GBP; and by extension, unique trading opportunities.
The reason for this is simple – nearly half of all forex transactions are processed by the Tokyo and the London trading centers. This frenzy usually results in the USD/GBP pair assuming a definite downward or upward trend. The good thing is that when this trend starts to form, it is usually quite apparent, which means you can use the High/Low binary options to make yourself some money.
If there is one thing the USD/GBP is known for, it is its large aggressive movements; particularly after important news releases. These movements take place over a short period of time, say within an hour or so after the news is released.
Consequently, Range options can work really well in such cases. And if you are more confident about the direction of the price movement based on the nature of the release, you can always use the Up/Down options.
What Works Better for the USD/GBP, Fundamental Or Technical Analysis?
Fundamental analysis is obviously quite important to understanding how this currency pair will behave in the market. Major economic news releases will obviously have an impact on how the price of USD/GBP will change either over the short term or the long term.
Therefore, these news releases can be a good way to find large price movements that can help you make money from Range options. However, in some cases, you might know that a large move is in the offing, but find yourself lacking adequate information to understand whether it will be in an upward or downward direction.
This can happen when the market is experiencing large trading volumes and the bears and the bulls are fighting it out to see who wins. That is where technical indicators can kick in because they can tell you who is more likely to win; giving you an opportunity to take a favorable position in the market using an appropriate binary options contract.
So, even though your trading decisions may exclusively rely on fundamentals like economic data, having a few indicators in your arsenal of trading tools can help you get more out of this currency as a binary options trader.
A momentum indicator, for instance, can help you know whether the market is being bearish or bullish, and this can help you make better trades or even avoid potentially unsuccessful trades.
Find Your Own Style
Of course, when it’s all said and done, you have to try various trading styles and establish with certainty what works for you and what doesn’t. As with any other trading situation, success with the USD/GBP pair will only come after you have found a strategy that works for you; and that comes down to having a strategy that you can faithfully follow until you can achieve the monetary rewards it has in store for you.