Trade Update: Selling into Euro and GBP Strength, Aussie Weakness
Article summary: An important drop in volatility expectations makes selling the sudden Euro and British Pound bounces attractive, while higher Aussie Dollar volatility prices point to further AUDUSD lows.
View a comprehensive view of the opinions in this article via today’s archived automated trading webinar.
Market conditions remain challenging for our trend and price-following Momentum and Breakout trading systems, but our low-volatility Range2 trading system stands to do well across a number of currencies in slow-moving markets.
The sudden Euro and British Pound rally/US Dollar sell-off seems an attractive opportunity to play trading ranges; as long as the British Pound remains below $1.5605 we like a short position. The Euro, on the other hand, continues to respect its month-to-date highs at $1.3242. A short position remains attractive as long as volatility remains low and key levels hold.
The Australian Dollar and New Zealand Dollar pairs are the key exceptions: both currencies show elevated volatility expectations. The AUDUSD in particular looks as though it may decline sharply as it stays below key resistance at $1.0260. The NZDUSD looks similarly bearish below $0.8590.
DailyFX PLUS Trading Strategies Snapshot
Screenshot of the strategy dashboard available on DailyFX PLUS
See the table below for an updated breakdown of volatility and trading biases:
Wrapping things up: We’ve seen a big slowdown in forex market moves, and our previously-favored Momentum2 and Breakout2 strategies have had a poor run of trades as they get chopped up. There’s no need to force the issue—we’ll simply shift towards our Range2 strategy and similar; the EURUSD and GBPUSD are attractive in this regard.
Automate the Momentum2 trading system via the FXCM Apps store
Automate the Range2 trading system via the FXCM Apps store
--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com
To receive the Speculative Sentiment Index and Trade Updates this author via e-mail, sign up for his distribution list via this link.
Contact David via
Twitter at http://www.twitter.com/DRodriguezFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.