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US Dollar Price Volatility Report: GBP/USD, NZD/USD, USD/JPY

US Dollar Price Volatility Report: GBP/USD, NZD/USD, USD/JPY

Rich Dvorak, Analyst

US DOLLAR CURRENCY VOLATILITY HIGHLIGHTS GBP/USD, NZD/USD, USD/JPY:

  • The US Dollar ended its 5-day straight rally with the DXY Index set to slide roughly 0.25%
  • USD price action focuses attention on GBP/USD, NZD/USD and USD/JPY amid the latest Brexit developments, a looming RBNZ rate decision and stalling appetite for risk
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The US Dollar slipped by a modest 0.21% on balance judging by performance of the DXY Index headed into Monday’s close. Lack of strength in USD price action to start the week can be primarily attributed to a rise in spot GBP/USD on hopes that ‘Brexit paralysis’ may soon come to an end while spot USD/JPY slid owing to a pause in risk appetite as doubts over the US-China phase one trade agreement arise.

US DOLLAR INDEX PRICE CHART: DAILY TIME FRAME (APRIL 10, 2019 TO NOVEMBER 11, 2019)

US Dollar Price Chart DXY Index Technical Analysis

Chart created by @RichDvorakFX with TradingView

I noted in the US Dollar Price Volatility Report published this past Friday that the Greenback’s rally last week was impressive, yet USD price action faced an intimidating zone of technical resistance. This area of confluence – underpinned by the US Dollar Index’s 50-DMA near 98.25 – appears to have kept a lid on further upside progression so far.

An extended retracement lower could be in the cards but the 100-day simple moving average and mid-point retracement of the US Dollar’s trading range since June 25 around the 97.75-98.00 price zone will look to keep the world’s reserve currency buoyed.

US DOLLAR IMPLIED VOLATILITY & TRADING RANGES (1-WEEK)

US Dollar Implied Volatility Trading Ranges EURUSD GBPUSD NZDUSD AUDUSD USDJPY

Forex volatility remains suppressed judging by 1-week implied volatility derived from forex options contracts on major USD currency pairs. However, that is not to say that the US Dollar nor its counterparts lack catalysts with potential to spark price action.

EUR/USD: It seems peculiar that the latest EUR/USD 1-week implied volatility reading falls in the bottom 5th percentile of measurements taken over the last 12-months considering high-impact economic data out of the Eurozone and United States later this week. While spot EUR/USD prices are on pace to rebound from last week’s slide, forex traders will likely turn to Tuesday’s release of the ZEW sentiment survey and Germany GDP data as well as US inflation and retail sales to provide evidence for fundamental follow-through.

GBP/USD: The cable climbed during early Monday trade in response to remarks from Brexit Party Leader Nigel Farage who stated that the Brexit Party would not contest the 317 seats previously championed by the Conservative Party won in the 2017 general election. In turn, this reduces the likelihood that Tory PM Boris Johnson will be forced to struggle with getting a Brexit deal approved by another hung Parliament. That said, 3Q UK GDP data published Monday morning indicated that the UK narrowly escaped falling into a technical recession while Moody’s downgraded the UK’s sovereign credit rating outlook late last week.

NZD/USD: The Kiwi-Dollar is expected to be the most volatile USD currency pair this week with an implied volatility reading of 8.45%, which tops its 20-day average reading of 7.39% and ranks in the top 75th percentile of measurements taken over the last 12-months. Though an elevated implied volatility reading for NZD/USD is to be expected seeing that an RBNZ rate decision is slated for release Wednesday at 00:00 GMT.

AUD/USD: Keeping close tabs on the Aussie will be vital this week in light of Sino-American trade war headlines, key economic figures out of China (Australia’s largest trading partner) and Aussie jobs data expected to cross the wires. Also noteworthy is how the Aussie may take cue from the RBNZ decision given the strong positive correlation between AUD/USD and NZD/USD.

USD/JPY: Changes in FOMC rate cut expectations and market sentiment stands to be reflected chiefly in spot USD/JPY price action. I noted earlier that US Dollar outlook relative to JPY grows increasingly less optimistic as upward momentum stalls and appetite for risk fades driven predominantly by US-China trade war uncertainty. Nevertheless, evidence that US inflation is running hot could underscore a firming FOMC while further progress toward finalizing the expected phase one trade agreement for President Trump and President Xi to sign are both prospects that stand to propel USD/JPY higher.

-- Written by Rich Dvorak, Junior Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight

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

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