Currency trading market volatility measures have all continued to fall, as forex speculators show relatively little willingness to break the Euro and other majors out of their narrow trading channels. Tomorrow’s US Non Farm Payrolls event has not caused a noticeable shift in highly sensitive 1-week currency options, and indeed it seems that few are geared up for major moves following the infamous employment report. Of course, we will always remain on the defensive and manage position risk ahead of such historically market-moving events, but it seems that currencies are likely to remain Rangebound through the foreseeable future.
Preferred Strategies
Pairs to Range Trade – Rangebound markets should improve the profitability of our “Pairs to Range Trade”, but the strategy’s recent underperformance decreases confidence in its ability to outperform in seemingly favorable market conditions. Keep an eye out for good range setups, but as always use your own discretion in picking promising trades. Speculative Sentiment Index Trading Signals – Our Speculative Sentiment Index trading signals have underperformed as of late, as the contrarian strategy tends to perform best in clearly trending markets. We recommend underweighting exposure to SSI signals until we see a clear shift in our current range trading bias. Systems Outlook
Chart Definitions
Volatility Percentile – The higher the number, the more likely we are to see strong movements in price. This number tells us where current implied volatility levels stand in relation to the past three months of trading. We have found that implied volatilities tend to remain very high or very low for extended periods of time. As such, it is helpful to know where the current implied volatility level stands in relation to its medium-term range. Trend – This indicator measures trend intensity by telling us where price stands in relation to its three-month range. A very low number tells us that price is currently at or near quarterly lows, while a higher number tells us that we are near the highs. A value at or near 50 percent tells us that we are at the middle of the currency pair’s quarterly range.