Pound’s consolidation likely to end with volatility burst

Pound on 6th of August had taken support of rising trend line, which has been in place since May, 2015, however as of now, it seems that it is not a sufficient condition for pound to break its recent consolidation.

Pound has been consolidating against Dollar since early July and remained trapped with 1.54 area acting as support and 1.568-1.572 area as resistance.

With FED hike looming ahead, fundamentals remain a bit clouded for Pound/Dollar. Key question remains, how hawkish the FED is for subsequent hikes.

Today Pound, though started strongly but failed to advance beyond 1.569 and heavy selling pressure has pushed it down to trade around 1.563 as of now.

Volatility burst -

• 5 day average of realized volatility as measured by ATR has fallen to lowest since March. Pound is roughly moving about 78 pips daily or about 0.5%.
• Since the consolidation is suppressing the volatility, it is likely to result in volatility spike when Pound finally breaks out of the range.

How long might the consolidation continue?

• Pound/Dollar might keep consolidating until further cues appears from with respect to monetary policy. That makes, Payroll data, BOE minutes, NFP data extremely vital.
• The consolidation might continue until the next FOMC in September.