- US Dollar at major cyclical turning point, is strength ahead?
- A spike in forex volatility prices favors bigger moves in the days to come
- We’ll keep a close eye on the Dollar Index in particular as it bounces off key lows
The US Dollar
continues to trade within a familiar trading range, but the coming week
promises big currency moves. Why might this finally bring the Dollar
break?
The beginning of the new week, month, and calendar
quarter is a critical time for major financial asset prices. Why? Put
simply, currencies and other assets are considerably more likely to
establish new trends and trend reversals at the beginning of new
calendar periods.
We can see this on a daily, weekly, monthly,
quarterly, and yearly basis. As might be expected, the change of quarter
and year is considerably more important than month, week, day, and so
on.
Short-term FX volatility prices have likewise surged
ahead of what promises to be a big week for economic event risk, and
this in turn adds further weight to our argument for an important US Dollar reversal.
Short-term Forex Volatility Prices Jump Ahead of Critical week for US Dollar
Source: OTC FX Options Prices from Bloomberg; DailyFX Calculations
We’ll pay special attention to the trading range in
the Dow Jones FXCM Dollar Index, as a hold of key lows suggests that the
cyclical turn window may coincide with an important US Dollar bottom.
Cyclical Turn Window Lines up with Dollar Bounce off of Key Lows
Source: FXCM Trading Station Desktop, Prepared by David Rodriguez
From an automated trading strategy perspective, our
outlook for trends leave us in somewhat of a “wait and see” mode. In
short: we generally want to be positioned for Dollar strength, but
markets likewise need to show themselves willing to push the Greenback
strongly off of lows.
We’ll keep a close eye on US Dollar pairs in the week ahead. Sign up for future e-mail updates via my distribution list
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DailyFX Individual Currency Pair Conditions and Trading Strategy Bias
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