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The FX market has left traders with limited opportunity lately with volatility at depressed levels. EUR/USD one-month implied volatility has sunk to its worst levels of the year and even longer, actually. This means we need to be patient in waiting for opportunities and adjust expectations. With that said, volatility is mean-reverting and so we need to be on our toes in the event it begins to rise again. Which it could soon.
The euro remains trending lower out of the ‘head-and-shoulders’ pattern it recently triggered. Still looking for lower prices, but a bounce back into the 11660/90 area could develop first. GBPUSD is stuck in a choppy sideways range above confluence of support. A clean break of 13000 is needed to clear below all support and give cable a chance at gaining downward momentum. If it holds and a bounce develops then the 13300-area is viewed as a spot to look for sellers to step in again.
USDJPY isn’t looking too healthy and could soon break down out of a wedging pattern forming at a confluence of three points of resistance. This could happen with the help of a short-term topping formation set to soon trigger in the S&P 500. This could actually be a good thing for volatility across multiple asset classes. We’ll visit that in a minute.
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The Yen-crosses look ready to suffer as well, with one of the set-ups we focused on coming in EUR/JPY and a breach of key support in the 13190/40-area. GBPJPY is also rolling over, but the preferred set-up right now is in in EUR/JPY given lack of support below should it cross below the aforementioned zone. We also looked at AUDJPY and CHFJPY. (Yen-cross portion of the video starts here.)
We skipped over commodities as we took a look at those yesterday, but did touch on the S&P 500 and Dow. Both of these indices are sporting similar short-term rising wedges, which are very near their trigger point. For more on that, check out this piece from earlier.
For full technical considerations, please see the video above…
---Written by Paul Robinson, Market Analyst
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