Talking Points:
• Volatility readings continue to drop to extreme lows - contrarian red flags
• Plenty of pairs and markets - EURUSD, GBPUSD, Yen Crosses, S&P 500 - are on the verge of breakouts
• History shows that Friday volatility swells and breakouts are unusual but not impossible
Keep tabs on the major event risk that can generate heavy volatility next week using the DailyFX Economic Calendar.
The breakout risk hangs heavy in the air. EURUSD and Yen crosses have worked their way into multi-month wedge paterns, while benchmarks like the S&P 500 are due for a strong and determined move. Appetite for volatility is driving some to position now in hopes that volatility will eventually show up. That is a risky proposition. Aside from divining the correct direction - dependent on the catalyst - the timing is another uncertainty. How often do markets make a break on Friday? Is there event risk in the final 24 hours of this week to leverage a break? Does next week's fundamental swell lend to inactivity now? We discuss this in today's Strategy Video.
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