Ahead of the UK CPI data, below is a quick snapshot of today's implied volatility support and resistance levels for GBPUSD, EURGBP, GBPJPY and GBPNZD.
GBPUSD: 1.3540 (resistance) - 1.3430 (support)
EURGBP: 0.8650 (resistance) - 0.8600 (support)
GBPJPY: 200.00 (resistance) - 198.00 (support)
GBPNZD: 2.2945 (resistance) - 2.28100 (support) - it's worth noting that after the RBNZ, the pair is already trading above the 3st-dev implied volatility high. That doesn't mean it can't go higher, but it does mean be more careful for short-term exhaustion.
These levels are based on 1-month implied volatility and can be used as dynamic and market-based levels of support and resistance.
These levels on their own are quite handy, but when we combine them with technical analysis tools like pivot points, or fibs, or psychological levels, you can identify potential entry, take profit, or stop-loss levels with more increased confidence.
What's unique about using implied volatility is that it provides a totally objective and data-dependent price range to complement your subjective technical analysis.
