US Dollar Long Positions Attractive versus Euro, Aussie on Trends
The resurgent US Dollar looks to trade higher against the Euro, Australian Dollar, and other key counterparts. It looks like the next leg of USDOLLAR strength is underway and trend trades are favored.
DailyFX Individual Currency Pair Conditions and Trading Strategy Bias
DailyFX PLUS System Trading Signals –The Dow Jones FXCM Dollar Index (ticker: USDOLLAR) has rallied to start the week, setting the stage for further strength as we see important risk of further AUDUSD and EURUSD weakness. Two weeks ago we claimed that the Euro may have topped against the US Dollar based on an important shift in speculative sentiment. That analysis still holds, and trend trades remain favored in the days ahead.
In terms of individual strategies, ‘Trend Follower’ and ‘Tidal Shift’ stand to do well amidst sharp price moves. To a similar extent, ‘Breakout Opportunities’ could pick up on sharp intraday moves. Two weeks ago we wrote that we like long ‘riks’ trades. Yet the opposite is now true as it seems the safe-haven US Dollar can continue higher.
Volatility expectations have picked up as of late but remain low by historical standards. This admittedly complicates our US Dollar-bullish view. If volatility levels remain depressed, the safe-haven USD will tend to do poorly. We will keep a close eye on the next week of market moves.
--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com
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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 90 days 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 90 trading-day range. A very low number tells us that price is currently at or near monthly 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 monthly range.
Range High – 90-day closing high.
Range Low – 90-day closing low.
Last – Current market price.
Bias – Based on the above criteria, we assign the more likely profitable strategy for any given currency pair. A highly volatile currency pair (Volatility Percentile very high) suggests that we should look to use Breakout strategies. More moderate volatility levels and strong Trend values make Momentum trades more attractive, while the lowest Vol Percentile and Trend indicator figures make Range Trading the more attractive strategy.
HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.
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OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS. Any opinions, news, research, analyses, prices, or other information contained on this website is provided as general market commentary, and does not constitute investment advice. The FXCM group will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance contained in the trading signals, or in any accompanying chart analyses.
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