EURUSD
The implied vol spread dropped precipitously during the week following a period of euro bidding on pessimistic dollar data. Although still harboring signs of a potential upside momentum, the pair looks constrained by the current resistance ceiling. As a result, the implied spread has plunged past the more tepid figure last week as short terms collapsed dipping below 7 for a brief time while longer term components kept to the figure posted previously. With the return higher in short terms, the suggestion looks to imminently show another breakout scenario past the current 1.2200 ceiling. However, without a fundamental catalyst, the pair may very well hover the handle.
GBPUSD
Sterling vols declined in similar fashion as the euro counterparts dipped below the lower band. Falling further than the euro implieds, the spread continues to decline, visibly offering the second lowest spread. Subsequently, short term implieds fell the most of all the majors and continues to reside below the 7 percent, hovering slightly above 6. As long terms continue to reside above 7, short term pickups look highly probable given the current level. This would confirm a lingering breakout scenario on the currency pair as the last time we were at this level below the band, a reversal occurred in the spot price.
USDJPY
Choppy implied activity in the spread as yen vols remain between the bands, suggestive of a neutral bias during the week. With the temporary surge in vols leading to a breakout suggestion, lower event risk looks to be taking its toll keeping the differential rather tamed. At this point, the only spark that may ignite some meaningful market fluctuations look to be further statements from central bankers or suggestions regarding any yuan revaluation. Notably, short term ticked higher against some of the majors, ranking third among the gainers for the week. Comparatively, longer terms kept in line with last week’s post.
USDCHF
Swissie vols dipped below the lower band sparking notions of an incoming breakout situation. Confirming the indication looks to be an upturn back to the support band as short term rise in the near term. In comparison to the majors, the USDCHF implieds climbed in sync with both long and short term components rising 13 points. With the USD being driven by each and every economic release, a short term pickup looks imminent, especially with the inclusion of Friday’s durable goods orders report. Notably, the last time the spread was this low, the signal preceded a considerable uptrend in late 2005.
USDCAD
Climbing the second highest of all the majors, short term implied surged higher as longer term components connected with the ground. Rocketing almost 8 times that of long terms, short term implieds rose above the 7 percent figure once again, almost 100 points from last week’s measure. As a result of the momentum, the USDCAD spread is now positive and set for ranging conditions on a pullback. Hovering the upper band, the probable drop may provide a temporary top as the underlying is set to flatline. Further momentum looks to only be sparked by another near term rate hike or definite speculation on the aforementioned.
AUDUSD
Aussie short terms soared to the highest level of all the majors, bringing the spread considerably above the zero line. Jumping 165 points on the week, the short term implied spike looked to be attributed to considerable selling pressure on a continuation of the previous month’s selloff as longer term components subsequently rose. As a result, the surge has now brought the short term measure above the longer term, prompting an imminent pullback. Should the measure dip back, ranging conditions look to be reflective of a temporary bottom till technical levels look to bring the spot higher.