Vantage FX (www.vantagefx.co.uk) look at how we can use technical analysis to improve scalping.

Scalping Week

We are looking initially at a 4-hourly GBP/USD chart where we can see a steady rally throughout September. We have managed to hold above the middle line of the Bollinger Band up until the beginning of this week, where we had one big push to the upside then a move back into the Bollinger Band.

Now we are focusing on a 1-hourly chart and as there are no major economic numbers this week, the likelihood of a surprise move is limited. The trend is for a stronger sterling. Overnight last night we got stuck at the 1.60 level at the centre of the Bollinger Band, having just dropped, so it was likely to drop again.

Indeed the drop did occur, but not as much as we might have expected, as the rising 200-period moving average prevented it. This morning there was a burst higher to the top of the Bollinger Band as the UK CBI survey came in higher than predicted, reinforcing the concept that things are slowly improving in the UK.

On the break through the 50-period moving average we have accelerated and the Bollinger Bands have widened out. When they widen out suddenly it indicates that we're moving into trend mode rather than consolidation. We have a Doji above the Bollinger Band, suggesting indecision, as US new home sales for August were among the lowest seen since 1962.

We expect the Bollinger Bands to continue to widen tonight with cautious rallies, and the closer we get to 1.61/1.62 (long-term resistance levels) the more difficult sustained gains will become.