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US Dollar Price Volatility Report: EUR/USD, GBP/USD, USD/CAD

US Dollar Price Volatility Report: EUR/USD, GBP/USD, USD/CAD

Rich Dvorak, Analyst

US DOLLAR PRICE OUTLOOK: EUR/USD, GBP/USD & USD/CAD IN FOCUS HEADED INTO FRIDAY’S TRADING SESSION

  • The US Dollar continues to oscillate between its 50-day and 200-day simple moving averages amid heightened uncertainty regarding where US-China trade talk progress truly stands
  • EUR/USD price action comes into focus ahead of a speech from the ECB’s Christine Lagarde due Friday with GBP/USD and USD/CAD also eyed ahead of Markit PMI and Canada retail sales data
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The US Dollar edged marginally higher throughout Thursday’s trading session, though a lack of fundamental developments today kept USD price action relatively contained. Two culprits that might explain the latest bump in the broader US Dollar could include safe-haven demand as US-China trade talk uncertainty lingers and also follow through from Wednesday’s advance after the October FOMC minutes release.

It is expected that the trade war headlines will likely strongarm risk appetite and the direction of the US Dollar. Although, notable event risk slated for Friday, which is detailed on the DailyFX Economic Calendar, brings to focus EUR/USD, GBP/USD and USD/CAD.

Specifically, ECB President Christine Lagarde is set to speak in Frankfurt Friday at 8:00 GMT and will be followed by the release of Eurozone PMI data. Markit PMI reports for November will also be released on the UK and the US at 9:30 GMT and 14:45 GMT respectively while Canadian retail sales figures for September are expected at 13:30 GMT.

US DOLLAR INDEX PRICE CHART: DAILY TIME FRAME (MAY 09, 2019 TO NOVEMBER 21, 2019)

US Dollar Price Chart Outlook Technical Analysis DXY Index

Chart created by @RichDvorakFX with TradingView

I recently mentioned how the US Dollar appears juxtaposed between conflicting fundamental undercurrents by the prospect of a firming Fed and elevated downside risks to US economic outlook amid ongoing US-China trade uncertainty.

This could facilitate a trading range for the US Dollar over the short term if this is the new status quo as markets gyrate while awaiting the next major development that moves the market’s needle with conviction.

That said, the 50-day and 200-day simple moving averages (detailed on the DXY US Dollar Index chart shown above) could serve as possible points of reference with potential to keep USD price action relatively contained.

CHART OF FOMC INTEREST RATE CUT PROBABILITIES (MARCH 2020)

Chart of FOMC Interest Rate Cut Probability March 2020

The probability of future Fed rate cuts has since drifted lower since yesterday’s release of October FOMC minutes which detailed less-dovish language from the Federal Reserve and its central bankers. In fact, the probability that the FOMC cuts rates again by its March 2020 FOMC meeting dropped from 40.9% on Wednesday to 34.4% today.

CHART OF US DOLLAR IMPLIED VOLATILITY & TRADING RANGES

US Dollar implied volatility trading ranges chart EURUSD GBPUSD USDCAD

EUR/USD: Forex volatility could be back on the rise with EUR/USD overnight implied volatility ticking higher to 5.5%, which is above its average reading of 4.4% over the last 20-days. Aside from the upcoming speech from the ECB’s Lagarde and release of Markit PMI data, EUR/USD price action could be at risk owing to the lurking risk that the Trump administration cracks down on the EU with tariffs due to unfair trade practices. This White House is currently weighing whether to launch a Section 301 investigation that would allow the US to levy tariffs on the EU since missing last week’s Section 232 auto tariff decision deadline. If this story build momentum, the Euro could come under serious pressure – particularly against its US Dollar counterpart.

GBP/USD: The cable remains in forex traders’ crosshairs with PM Boris Johnson campaigning ahead of the December 12 general election in aims of securing enough Tory seats in Parliament for a controlling majority, which would likely enable the Prime Minister to push his Brexit deal through. Moreover, insight from Markit PMI data on the UK due Friday could reveal the economic impact that ongoing Brexit uncertainty has had on the UK economy. GBP/USD is expected to be the most volatile US Dollar major during Friday’s trading session judging by an overnight implied volatility reading of 7.1%.

USD/CAD: Last but not least, the Loonie comes into focus with Canadian retail sales data set for release. This follows an overall dull Canadian inflation report with all major BOC inflation indicators coming in line with market expectations. Spot USD/CAD has surged over 2.0% since its October swing low amid growing prospects that the Bank of Canada may soon capitulate and cut its policy interest rate. USD/CAD overnight implied volatility of 5.7% is running above its 20-day average of 4.3%.

For comprehensive technical outlook for USD price action, check out thisUS Dollar Chart Forecast: DXY, AUD/USD, USD/CAD, USD/JPY, EUR/USD.

-- 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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