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US Dollar Trading Levels for the Week Ahead

US Dollar Trading Levels for the Week Ahead

2014-07-14 14:45:00
David Rodriguez, Head of Product
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- We’re watching key US Dollar trading opportunities in major FX pairs

- Forex volatility remains near record-lows, making a Dollar breakdown unlikely

- Until conditions change, we’re watching important trade setups

Record-low forex market volatility keeps us focused on tight trading ranges in the US Dollar, and indeed we’re looking to USD-buying opportunities as the Greenback trades near key support.

Our DailyFX Volatility Indices currently show that traders expect extremely slow moves in the week ahead, and without a shift in market expectations it seems very unlikely that major USD pairs will break wide ranges. Thus we continue to look for opportunities to range trade—buy near important support and sell significant resistance.

We highlighted the levels we’re watching in the USDJPY and continue to look for buying opportunities near ¥100.80 and selling opportunities closer to ¥102.30. The Euro remains a sell if price nears key resistance at $1.3650, and downside targets start at $1.3580. One wildcard remains the British Pound. It’s entirely possible that the GBP set an important top versus the US currency, but current reward/risk levels actually favor a long position against key support near $1.7000.

Forex Volatility Continues to Trade near Record Lows, Point to Tight Trading Ranges

US Dollar Trading Levels for the Week Ahead

Data source: Bloomberg, DailyFX Calculations

It’s admittedly unsatisfying to look for such small currency moves, and the temptation remains to trade for much larger trends. Yet you can’t force a shift in market conditions, and more importantly we see evidence that most traders tend to do well in these slow-moving markets.

See the table below for full rundown on a per-currency pair basis and keep track of changing conditions with future e-mail updates via my distribution list.

DailyFX Individual Currency Pair Conditions and Trading Strategy Bias

US Dollar Trading Levels for the Week AheadUS Dollar Trading Levels for the Week Ahead

Automate our SSI-based trading strategies via Mirror Trader free of charge

--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com

To receive the Speculative Sentiment Index and other reports from this author via e-mail, sign up to David’s e-mail distribution list via this link.

Contact David via Twitter at http://www.twitter.com/DRodriguezFX

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 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 90-day 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 90-day 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.

ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES IS MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION.

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.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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