News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
Oil - US Crude
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
More View more
Real Time News
  • The Citi Economic Surprise Index tracking the US just turned negative for the first time since June 2020 This means economists are now overestimating the health and vigor of the economy, opening the door to disappointment ahead This does note bode well for NFPs next week...
  • Forex Update: As of 02:00, these are your best and worst performers based on the London trading schedule: 🇯🇵JPY: 0.00% 🇨🇭CHF: -0.04% 🇪🇺EUR: -0.05% 🇦🇺AUD: -0.09% 🇨🇦CAD: -0.13% 🇳🇿NZD: -0.15% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/yZQPhHsvEr
  • Heads Up:🇸🇬 Unemployment Rate Prel (Q2) due at 02:30 GMT (15min) Previous: 2.9% https://www.dailyfx.com/economic-calendar#2021-07-30
  • Amazon Earnings Cast a Shadow on Nasdaq 100. APAC Stocks to Open Mixed https://www.dailyfx.com/forex/market_alert/2021/07/30/Amazon-Earnings-Cast-a-Shadow-on-Nasdaq-100-APAC-Stocks-to-Open-Mixed.html https://t.co/R5aoytGQvQ
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Silver are long at 92.22%, while traders in Wall Street are at opposite extremes with 77.28%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/DdoKAC3hFV
  • Delta Variant accounts for 92% of new Covid cases in the US https://t.co/Ub43kJfk3L
  • Crude oil prices are trading largely unchanged following last week's rebound as the Delta variant of Covid and Chinese regulatory measures temper the near-term demand outlook. Get your market update from @FxWestwater here:https://t.co/T3oQa9qksd https://t.co/WdLYBIYQKU
  • The British Pound could remain vulnerable against the US Dollar while perhaps looking to push higher against the Australian Dollar, Canadian Dollar and New Zealand Dollar.Get your market update from @ddubrovskyFX here:https://t.co/9iZa4oE4WQ https://t.co/wyhhb4Jqxa
  • Hang Seng Index Futures at Key Inflection Point, Top to Resume? - #HSI1! chart https://t.co/dYgRPKhc9h
  • Amazon Q2 Earnings: -EPS at $15.12, versus $12.28 estimate (23% higher) -Revenue at $113 billion, versus $115 billion estimate (1.7% lower) -Share price tumbled 7% during after-hours trade as the company reported a slight revenue miss and gave weak third-quarter guidance
Aussie Dollar Volatility and Sentiment Called for Top – Now What?

Aussie Dollar Volatility and Sentiment Called for Top – Now What?

David Rodriguez, Head of Product

Australian Dollar volatility and sentiment readings recently hit extremes that have historically coincided with important tops, and more recent price action suggests this may be in fact the turnaround we’ve anticipated.

Volatility has since bounced from multi-year lows, while sentiment has likewise corrected from previous peaks and our SSI-based “Tidal Shift” strategy has since sold AUDUSD. We believe that the turns in volatility and sentiment support calls for an important Australian Dollar top.

Forex Correlations Summary

View forex correlations to the Dow Jones Industrial Average, Crude Oil Futures prices, US S&P 500 Volatility Index, UK FTSE 100, and Spot Gold prices.

Dow Jones

EURUSD

GBPUSD

USDJPY

AUDUSD

USDCAD

NZDUSD

USDOLLAR

1 Week

-0.09

0.63

0.24

0.43

-0.34

0.38

-0.08

1 Month

0.74

0.74

0.36

0.81

-0.87

0.76

-0.77

3 Month

0.59

0.70

0.28

0.78

-0.86

0.73

-0.69

1 Year

0.68

0.60

-0.01

0.82

-0.82

0.75

-0.73

Crude Oil

EURUSD

GBPUSD

USDJPY

AUDUSD

USDCAD

NZDUSD

USDOLLAR

1 Week

0.25

-0.21

0.84

-0.10

-0.41

-0.58

0.66

1 Month

0.53

0.56

0.29

0.63

-0.63

0.53

-0.58

3 Month

0.60

0.58

0.23

0.67

-0.79

0.58

-0.65

1 Year

0.46

0.39

0.09

0.60

-0.61

0.54

-0.52

VIX

EURUSD

GBPUSD

USDJPY

AUDUSD

USDCAD

NZDUSD

USDOLLAR

1 Week

-0.14

-0.12

0.77

0.42

-0.48

-0.19

0.63

1 Month

-0.60

-0.64

-0.18

-0.68

0.66

-0.74

0.69

3 Month

-0.50

-0.59

-0.32

-0.74

0.72

-0.71

0.60

1 Year

-0.61

-0.53

-0.01

-0.71

0.69

-0.67

0.65

FTSE 100

EURUSD

GBPUSD

USDJPY

AUDUSD

USDCAD

NZDUSD

USDOLLAR

1 Week

-0.04

0.02

0.77

0.35

-0.62

-0.24

0.52

1 Month

0.45

0.49

0.31

0.62

-0.68

0.65

-0.51

3 Month

0.36

0.47

0.44

0.57

-0.57

0.54

-0.39

1 Year

0.46

0.39

0.07

0.68

-0.64

0.64

-0.55

Gold

EURUSD

GBPUSD

USDJPY

AUDUSD

USDCAD

NZDUSD

USDOLLAR

1 Week

-0.89

0.27

-0.33

0.73

-0.69

0.32

-0.35

1 Month

0.51

0.53

-0.05

0.59

-0.63

0.53

-0.63

3 Month

0.52

0.30

-0.28

0.38

-0.28

0.39

-0.54

1 Year

0.31

0.27

-0.19

0.38

-0.28

0.39

-0.41

Perfect Positive Correlation:

1.00

Perfect Negative Correlation:

-1.00

Correlation between Australian Dollar/US Dollar Exchange Rate and 3M Implied Volatility

australian_dollar_forecast_top_body_Picture_1.png, Aussie Dollar Volatility and Sentiment Called for Top – Now What?

Australian Dollar/US Dollar Exchange Rate (lhs)

Australian Dollar/US Dollar 3-Month Implied Volatility (rhs)

Correlation between AUDUSD and 3-Month implied Volatility

Last week we wrote that extremely low levels of volatility expectations warned of a significant Aussie Dollar turnaround. According to 3-month AUDUSD options prices, vols fell to their lowest levels since the pair set its all-time peak in 2008.

A strongly negative correlation between the Australian Dollar/US Dollar pair and volatility helps explain why the AUD has rallied to multi-year peaks. Yet a 3-month reading below 10% has coincided with market turning points in the past, and indeed we may see such low levels as warning that markets have become extremely complacent.

Volatility is mean-reverting; if vols are too low for too long, it can subsequently surge. There is obviously no way to know what is “too low”, and timing a reversal is exceedingly difficult. Yet early evidence lines up with other signs that the Australian Dollar could soon see an important correction. The strongly negative correlation between volatility and the AUDUSD implies that the pair stands to drop sharply on such a reversal in vols.

Our proprietary retail forex trader-based Speculative Sentiment Index likewise showed that retail traders hit their most extremely net-short AUDUSD since the pair topped in July.

Retail Forex Trading Crowds Most Net-Short AUDUSD Since July Top

australian_dollar_forecast_top_body_Picture_2.png, Aussie Dollar Volatility and Sentiment Called for Top – Now What?

If SSI ratio (rhs) is negative, it represents the number of traders short for every one long. If it is positive, it is the number of traders long per every short. For a full explanation of the SSI, see our FXCM Expo presentation.

The chart above shows that SSI ratios at or below -3.0 have coincided with several important AUDUSD tops dating back to July, 2011. The fact that Aussie Dollar SSI recently hit as low as -3.4 marked a potential sentiment extreme.

The SSI has more recently traded to -2.2 as traders close positions into AUDUSD declines, and our sentiment-based “Tidal Shift” system went short as of 8/13 at $1.0537. We wrote last week: “As the name implies, said system looks to catch a major shift in the so-called tide (trend). Past performance is not indicative of future results, but we’ll keep a close eye on the SSI and the Tidal Shift system as it has historically caught important tops/bottoms across major currency pairs.”

Volatility Levels and Sentiment Pull Back – Is this the Turnaround?

Australian Dollar volatility and sentiment have remained near extremes for some time now, and the most recent pullbacks in both trader positioning and vols warn that this may be the start of a major turnaround. We can’t emphasize enough that timing reversals is extremely difficult, and in fact our SSI-based “Tidal Shift” strategy more often produces losing trades than winners.

Yet it’s difficult to ignore early signs that this may in fact be the Australian Dollar top we’ve anticipated. It will be critical to watch whether the AUDUSD holds recent lows of $1.0435, and our Senior Technical Strategist believes that a break below could provide confirmation of the Aussie Dollar top.

--- Written by David Rodriguez, Quantitative Strategist for DailyFX.comTo contact David, e-mail drodriguez@dailyfx.comTo be added to David’s e-mail distribution list for this and other reports, e-mail subject line “Distribution List” to drodriguez@dailyfx.com

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

DISCLOSURES