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Written by Richard Lee, Currency Analyst

EURUSD    RANGE
GBPUSD    RANGE
USDJPY    NEUTRAL
USDCHF    RANGE
USDCAD    NEUTRAL
AUDUSD    RANGE

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  EURUSD
Euro short term implieds spiked the highest of all the majors over the duration of the week, leading the spread through the upper band according to our model.  Reflective of the short term pickup in the underlying spot, the spread now looks overdrawn with a pullback looking probable in the next few sessions.  This would ultimately signal a range bound continuation as the spot price bounces between barriers at the topside 1.2300 and bottomside floor at 1.1850.  Nonetheless, a topside break here, would likely see a short continuation in volatility as the current ceiling holds heavy weighting.  Comparatively long terms rose only slowly by half, keeping the slight spread advantage.  


 GBPUSD
Sterling vols mimicked euro implieds and shot through the upper band of our differential model, suggesting range bound conditions.  However, the signal looks to be a simple continuation off of an earlier suggestion as the spot remains confined to the 1.7600-1.7250 channel that has existed over the past two months.  Comparatively, short term vols rose the third highest against the majors as longer term components kept steady climbing only slightly.  As a result, the spread continues to narrow with short terms potentially taking over on post central bank activity.  The advance higher looks to only delay the inevitable range bound pullback signal as we test the 1.7600 handle in the short term.


 USDJPY
Spiking on intra week volatility, short terms have pulled back slightly and lent a neutral signal to the Japanese yen currency pair.  With repatriation out of the picture and inflationary speculation muted, the pair looks committed to relatively staid price action with the 119 handle serving as the upper boundary.   What is notable is the fact that short terms for the pair remain above the longer term component in comparison to subsequent pairs suggesting strong activity.  Short terms should pickup again later in the month as G7 ministers meet along with a Washington visit by the Chinese President Hu Jintao.  Providing the direction the spot needs, a break in the current technical picture would surely see a test of the upper boundary.


 USDCHF
Rocketing the second highest of all the major implieds, Swissie vols surged through the upper band in similar fashion to the euro implieds.  As a result, similar reasoning should be applied even as fundamentals were counter to the spot’s movements over the course of the week.  Expect dollar volatility to be reflected in this pair as heavy speculation looks to resurface over potential diversification from central bank’s and continued geopolitical situations.  As in the euro model, Swissie fluctuations look to be confined as a pullback indicates range bound environment.


 USDCAD
Canadian implieds remained neutral on the week as both components hardly moved in either direction.  With consolidation in the underlying, it’s not surprising that the spread posted the last place finish.  Short term implieds remained on relatively equal footing with short terms rising and longer terms declining incrementally.  Now with the spread razor thin, continued ranging looks probable.  The one caveat looks to be the economy’s lone release this week that could pose for some peak in implieds.  Should the release be rate hike positive, the current 1.1600 floor may hold weakly with the break causing a short term ramp up.


 AUDUSD
Aussie implieds finally pulled back from the meteoric rise over the past couple of weeks as a technical bottom looks to be established in the spot price.  Now rising on profit taking and better economic fundamentals, implieds have abated as the short term component fell 3 times the longer term’s fall.  Although set for a gradual rise back, the spot may still be stuck in a declining range bound channel as the spread has broken back through the upper band.  Any movement may be subtle as the spread consolidates with both components relatively equal at this time.