- Forex volatility is near record lows, conditions point to tight trading ranges
- Technical conditions favor US Dollar strength going forward
- Where are the trades for the USD ?
The US Dollar looks set to stick to tight ranges versus the Euro, Japanese Yen, and other currencies. Why is this a good thing for traders?
Forex volatility prices continue to trade near record lows and point to slow-moving markets in the week ahead, and our data shows that the majority of traders tend to do well in these conditions.
Most traders tend to range trade: they buy currencies that are cheap and sell those that are expensive. This type of strategy works in slow-moving markets, and that is exactly why we believe these are ideal trading conditions for many traders.
Forex Volatility Prices Trade Near Record Lows
Data source: Bloomberg, DailyFX Calculations
Thus in terms of market outlook we’re looking at big mean-reversion trades, and the fact that the US Dollar remains in broadly oversold conditions leaves us in favor of USD strength.
And indeed last week we highlighted a key dynamic that further supports the case for Dollar strength: forex seasonality. Currencies tend to make their highs and lows for the month/quarter/year at the beginning and the end.
Given that the Greenback bounced notably off of key lows versus the Euro and other counterparts, we believe that it may continue to trade higher through the foreseeable future.
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