• A liquidity drain has exacerbated low volatility levels, but activity is extreme even on a longer term
• Market conditions dictate that a rebound in volatility is very likely in the coming weeks
• Fundamentals behind the Euro in the meantime suggest that move is more likely to be bearish EURUSD
The week opened with a bearish EURUSD gap driven by the ECB's threat of monetary policy to arrest the currency's rise. While Draghi's connection between a high exchange rate and inflation is still just an undefined threat, the backdrop is starting to align for a larger turn for this benchmark pair. Even adjusted for the low liquidity holiday conditions, volatility behind this pair is extremely low and prone to normalization - in other words a breakout and momentum. Technicals present prevailing trends and a clear wedge. And, fundamentals present a growing bias. We look at the forecast and trade opportunity for the currency market's most liquid pair in today's Strategy Video.
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