|Tim Carrington, Global Head of FX|
Bollinger bandsThis technical indicator consists of a middle line (the exponential moving average) with an upper and lower band (plotted with a defined number of Standard deviations designed to show variations from the mean) above and below the middle line respectively. As the width of these bands varies depending on a currency pairs volatility around the mean, they can be used to signal impending volatility increases. Band levels may indicate if a currency pair is overbought or oversold. Investors often buy a currency pair when the price closes below the lower band (indicating the currency pair is oversold) and selling when the price crosses above the upper band.
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