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Written by Richard Lee, Currency Analyst

EURUSD - BREAKOUT
GBPUSD - BREAKOUT
USDJPY - BREAKOUT
USDCHF - BREAKOUT
USDCAD - NEUTRAL
AUDUSD - NEUTRAL



Click For PDF Version EURUSD
Implied spreads widened on the week as short term vols plunged 20 points, placing the overall figure further below the longer term components.  Comparatively, longer term components ticked slightly higher by 1 point to remain relatively unchanged on the week.  Event risk in the week forced short terms higher, especially with the current account and TIC data offering traders a lot of potential action.  As a result, coupled with still increasing sentiment on the potential shift in focus, from interest rates to the U.S. infrastructure, the underlying currency pair looks ripe for further continuation on the breakout signal as momentum increases.  Next line of resistance is at 1.2150.


GBPUSD
Sterling vols were late in turning as implieds on the short term side lagged a decline in the Euro implieds.  As a result, the spread has just recently ticked higher above the lower barrier, continuing to favor a breakout scenario should the momentum from the week’s move advance.  Subsequently, the dip in short terms now places the gauge significantly below the longer term, leaving some room for the event risk to take hold as we head into the weekend, before indicating neutrality.  Should the current resistance ceiling prove weak, the suggestion may prove correct as bulls look to advance to the technical channel top at 1.7900.


USDJPY
After plummeting in the week, short terms spiked higher on the gross domestic figure report which ticked slightly higher in the quarter.  With the central bank already noting a potential shift, the prospect of growth fed short term underlying spot action boosting the price to below the 118 handle.  However, after reaching back above the lower barrier, Yen implied spreads look to continue the ranging action as of late.  As a result, short terms remained unchanged for the week with longer terms rising incrementally by 15 points.  Should the current floor prove thin, the next step would be for bulls to drive the spot lower past the 116 support.

USDCHF
Creeping into neutrality, Swiss implieds rocketed back from below the lower barrier, signaling a breakout scenario.  Confirmed more by euro implieds and it’s rebound above the lower barrier, current momentum may keep the underlying spot directional momentarily.  At this point, however, traders should watch for a short term pop that may result in a rangebound suggestion.  For the record, short terms dipped slightly lower by 10 as the longer terms widened the gap, rising by 5 points.

USDCAD
Suggestive of the current staid action in the underlying spot price, Canadian vols declined from their previously lofty position back below the upper band.  As a result, conditions continue to be range bound as the price looks to once again test historic lows.  However, with plenty of economic releases set for the end of the week and the start of next, expect the risk to translate into potential action, popping the implied spread higher once again.  With that said, the spread is ticking higher as both short and long term rise simultaneously.

AUDUSD
In similar fashion to Canadian implied spreads, Aussie vols on both sides of the spectrum look to rebound from the week’s plunge below the upper band.  Both short and long term components rose on the week, in equal moves, as longer terms still hover above the short term component.  This has left the spread relatively unchanged on the weekly comparison.  Event risk and some speculative returns to the commodities look to heavily affect the currency pair in the near future, leading to the continuation of the nascent uptick currently forming.  As a result, a short term pop in underlying volatility may confirm suggestions of a subsequent ranging environment.