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EURUSD CURRENCY VOLATILITY – TALKING POINTS

  • Spot EURUSD eyes the ZEW’s Eurozone Survey of Expectations due Tuesday at 9:00 GMT while markets await US President Trump’s decision on auto tariffs
  • Overnight and 1-week EURUSD implied volatility of 5.87 percent and 4.98 percent respectively looks relatively low
  • Check out this week’s EURUSD technical outlook for additional insight

EURUSD whipsawed during Monday’s trading session as early gains in the Euro were later offset by strength in the US Dollar. The move occurred as risk-aversion reignited after reports dropped that China will retaliate against US tariffs which could have increased fears that President Trump might expand his Trade War to automobiles exports – a decision that would undoubtedly drag down Eurozone economic activity and the Euro.

FOREX MARKET IMPLIED VOLATILITY AND TRADING RANGES

Currency volatility and trading ranges for EURUSD, GBPUSD, USDJPY, USDCAD, AUDUSD, NZDUSD, USDCHFForex market volatility Euro, EUR, USD, GBP, JPY, CAD, AUD, NZD, CHF

Euro pessimism could have also accumulated throughout today’s trading session as markets prepare for Tuesday’s release of the updated ZEW Survey of Expectations – a Eurozone economic sentiment report that has dragged EURUSD lower in recent history. But, EURUSD overnight implied volatility remains subdued at 5.87 percent which suggests that forex option traders are not anticipating a large move in spot EURUSD over the next 24 hours.

EURUSD PRICE CHART: DAILY TIME FRAME (FEBRUARY 25, 2019 TO MAY 13, 2019)

Spot EURUSD Price Chart

Judging by the EURUSD overnight implied volatility reading, markets might expect spot prices to trade between 1.1195 and 1.1265 with a 68 percent statistical probability. Although EURUSD broke above its bearish downtrend last week, recent upside has been limited by technical resistance at the 38.2 percent Fibonacci retracement level drawn from the high and low printed on March 20 and April 26 respectively.

If an upbeat ZEW report is released Tuesday, EURUSD has potential to solidify its footing above the 1.1250 price level and continue its short-term uptrend. Conversely, renewed Eurozone pessimism expressed in the ZEW report could send EURUSD lower towards the 1.1210 area where spot prices might find trendline support.

As for EURUSD 1-week implied volatility, the latest measure of 4.98 percent is below its year-to-date average of 5.60 percent. The relatively low reading might come as a surprise considering the risk surrounding tomorrow’s ZEW report and Wednesday’s GDP data update in addition to the looming decision from US President Trump over levying fresh tariffs on auto imports due by Friday. But, EURUSD option pricing might suggest that currency option traders are discounting these risks with the expectation that Trump will likely “kick the can” on his auto tariff decision while economic data crosses the tape in line with market consensus.

- Written by Rich Dvorak, Junior Analyst for DailyFX

- Follow @RichDvorakFX on Twitter