Keep an Eye on these Currency Pairs as Volatility Risks Remain High

• Euro volatility prices remain high as Greek voters say “no” to the Eurogroup proposal
• US Dollar remains in position to outperform
• Elevated volatility prices leave us in favor of our Breakout2 trading system

Volatility prices remain high as Greek voters rejected a Eurogroup bailout and raised the risks of a Greek exit from the Euro Zone. We like trading high-volatility strategies until further notice.

We view further financial market volatility and turbulence as likely given clear uncertainty surrounding Greece’s future in the Euro Zone. And indeed the safe-haven US Dollar remains in a position to outperform given recent strength versus the Euro and the commodity bloc (AUD, CAD, and NZD).

Volatility prices themselves have actually pulled back somewhat since last week but remain elevated—particularly in the Euro and other risk-sensitive currencies. Relatively limited economic event risk in the week ahead explains much of the decline in vols. And as such we view a more sustained decline in market volatility as relatively unlikely.

Forex Volatility Prices Pull back on Limited Event Risk, but Market Turbulence Remains Likely

Data source: Bloomberg, DailyFX Calculations

Thus current market conditions may favor our Breakout2 trading strategy in most of the especially risk-sensitive currency pairs. This means watching the US Dollar versus the Australian Dollar, New Zealand Dollar, and Canadian Dollar in particular. While certain Yen pairs also show elevated risks of outsized moves in the days and weeks ahead.