The current low-volatility environment in FX is presenting a few trading opportunities, but one needs to be very selective and lean on price levels in the absence of momentum outside of USD/CAD. We looked at EUR/USD, GBP/USD, and a few others up close, along with gold/silver levels of interest.
- Current trading environment calls for fading levels (for now)
- EUR/USD, GBP/USD, USD/CAD in the spotlight
- Gold/silver could soon turn down from resistance
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So far this year volatility in the FX-spectrum has been lackluster for the most part despite an upstart in equity market volatility. At some point this will change, but until it does we must continue to take what the market offers.
Fading key levels after momentum stalls will remain the primary game. Once momentum gathers pace, then we can switch gears and look for breakout-style trades, larger price objectives, and other characteristics related to a higher-vol regime.
EUR/USD, GBP/USD, USD/CAD in the spotlight
EUR/USD turned higher on Friday from support, presenting an attractive opportunity for longs. But now that we are back in the thick of the range since January, new entries don’t offer good risk/reward. Resistance remains at the 2008 trend-line in the mid-12400s. This could be another area to watch for a fade.
EUR/USD Daily Chart (Range-bound)
For the intermediate-term fundamental/technical outlook, check out the Q2 Forecast for EUR
GBP/USD has shown more life than EUR/USD lately, trading around resistance via a trend-line from January and last month’s high. At this time, looking for momentum to fade, but overall given that price action is contracting towards a triangle this year along with a still generally bullish trend, risk/reward isn’t ideal for shorts.
A turn down and hold of the lower-end of the developing triangle/November trend-line could fill out the pattern nicely for a breakout trade later-on. Just a scenario for now, but could be a good one in the not-too-distant future.
GBP/USD Daily Chart (Triangle may be forming)
For the intermediate-term fundamental/technical outlook, check out the Q2 Forecast for GBP
USD/CAD has been one of the few spots lately where we’ve seen considerable momentum. The 2012 slope was broken yesterday, which has the swing-low at 12451 and 2012 trend-line in focus. It’s a bit extended in the short-term, but as long as price doesn't carry back above the slope, a bounce could offer an attractive counter-trend entry.
USD/CAD Daily Chart (Broke slope, eyeing trend-line)
For the intermediate-term fundamental/technical outlook, check out the Q2 Forecast for CAD
Gold/silver could soon turn down from resistance
The tactical approach to precious metals remains the same – resistance is viewed as a spot to sell, support to buy. This will remain the case until we see a breakout take shape in gold, either above the 2013 trend-line on a weekly closing basis (currently above intra-week) or drop below 1300. Silver is very near the top of downward sloping channel and could soon present another spot for would-be sellers to jump aboard a swing lower.
Gold Daily Chart (Watch for rally to fail)
Silver Daily Chart (Near channel resistance)
For the intermediate-term fundamental/technical outlook, check out the Q2 Forecast for Gold
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---Written by Paul Robinson, Market Analyst
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