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EURUSD: Overnight Implied Volatility Jumps Ahead of Friday's Data

EURUSD: Overnight Implied Volatility Jumps Ahead of Friday's Data

Rich Dvorak, Analyst

EURUSD Implied Volatility – Talking Points:

  • EURUSD overnight volatility has nearly doubled since last Friday as currency traders prepare for Eurozone and U.S. economic data slated for release tomorrow
  • Spot prices have coiled into a rising wedge pattern that looks ready to break into a new trend with the direction likely dictated by the data on deck
  • Download the Free 1Q 2019 EUR Forecast to see where DailyFX analysts think this key market might be headed

Tomorrow’s session looks to be a volatile one for EURUSD traders with key Eurozone and U.S. economic data due for release. Judging by the 1-Day (1D) implied volatility priced on the currency pair’s overnight options contract, trading levels should range between 1.1355 and 1.1431. Current spot EURUSD is 1.1379.

EURUSD IMPLIED VOLATILITY PRICE CHART: DAILY TIME FRAME (OCTOBER 01, 2018 TO FEBRUARY 28, 2019)

EURUSD: Overnight Implied Volatility Jumps Ahead of Friday's Data

Overnight implied volatility has nearly doubled since last Friday from a mere 3.4 percent to 6.4 percent as forex traders prepare for potentially sizeable price moves in the EUR and USD. At the same time, the currency pair marched roughly 0.8 percent higher from a low of 1.1316 before pulling back modestly from today’s high of 1.1420.

New to Forex? Check out the free DailyFX Beginner Guide to Forex News Trading!

EURUSD ECONOMIC CALENDAR

EURUSD: Overnight Implied Volatility Jumps Ahead of Friday's Data

With Eurozone inflation and unemployment rates set for release at 10:00 GMT, these market-moving indicators could send the Euro higher if data is reportedbetter than consensus. Alternatively, the currency could come under pressure quickly if concerns over the EU’s economic slowdown worsen in response a weak print.

Check out DailyFX’s free Economic Calendarfor a full list of data releases and economic events that impact USD, GBP, CAD, JPY, AUD, CNY, EUR, CHF, NZD and MXN markets.

Also, core personal consumption expenditures and the ISM’s manufacturing index are scheduled to cross the wires at 13:30 GMT and 15:00 GMT respectively with these metrics likely warranting a reaction in the USD.

Following today’s not-so-bad GDP numbers that beat estimates, further evidence of a healthy US economy may put the Federal Reserve back in the hot seat over interest rates. This could cause the US Dollar to catch bid if rate hike expectations start to rise if markets start pricing a data-dependent Fed transition from its patient wait-and-see approach back to a position of tightening.

EURUSD CURRENCY PRICE CHART: 4-HOUR TIME FRAME (FEBRUARY 11, 2019 TO FEBRUARY 28, 2019)

EURUSD: Overnight Implied Volatility Jumps Ahead of Friday's Data

The rising wedge pattern formed over the second half of this month has pushed the Euro-Dollar cross into a tight coil where prices look set to break out above trend resistance or below trend support. Consequently, is likely that tomorrow’s economic data will dictate the forex pair’s next direction.

FOREX MARKET IMPLIED VOLATILITY AND TRADING RANGES

EURUSD: Overnight Implied Volatility Jumps Ahead of Friday's Data

Take a look at IG’s real-time Client Positioning Sentiment Tracker to see the bullish and bearish biases of EURUSD, GBPUSD, USDJPY, Gold, Bitcoin, and S&P500 traders.

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Written by Rich Dvorak, Junior Analyst for DailyFX

Follow on Twitter @RichDvorakFX

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

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