EUR/USD: Volatility gauge hits record low, focus on US data


  • EUR/USD's ATM volatility has hit record lows and the S&P 50 VIX has dropped to seven-month lows. 
  • Volatility will likely spike if the US-China trade talks falter. 
  • The US personal and corporate spending numbers will take precedence over the Q3 GDP numbers. 

EUR/USD's one-month ATM volatility, which measures the calculated or implied mid-rate volatility for an at-the-money (ATM) option for a specific expiration date, dropped to a record low of 4.012 on Tuesday. 

The equity market volatility is also falling. The S&P 500 VIX, a measure of the stock market's expectation of volatility implied by S&P 500 index options, fell to 11.42 on Tuesday, the lowest level since April 17. 

The drop in the uncertainty, as represented by the volatility gauges, could be associated with the recent developments suggesting the US and China are closer to resolving issues. 

That said, an extended period of low volatility often paves the way for a big move on either side. The uncertainty will spike if the trade negotiations falter, possibly yielding a big drop in the common currency. 

As for today, the focus is on the US data – Q3 GDP, Personal Spending (Oct), Durable Goods Orders (Oct), Weekly Jobless Claims

The third-quarter annualized GDP is projected to be unchanged at 1.9%. The economy expanded 2% and 3.1% in the second and the first quarter, respectively. 

The US slowdown has been priced in by markets and the focus will be on the Personal Spending and Corporate Spending (Durable Goods Orders) data. If these numbers blow past expectations, EUR/USD will likely suffer a convincing break below 1.10. The German import price index, due at 07:00 GMT, is unlikely to move the EUR pairs. 

At press time, EUR/USD is trading in the red at 1.1013, having faced rejection at the descending (bearish) 5-day moving average at 1.1025. 

ATM volatility

Technical levels

EUR/USD

Overview
Today last price 1.1016
Today Daily Change -0.0008
Today Daily Change % -0.07
Today daily open 1.1024
 
Trends
Daily SMA20 1.1064
Daily SMA50 1.1042
Daily SMA100 1.1083
Daily SMA200 1.1171
 
Levels
Previous Daily High 1.1026
Previous Daily Low 1.1006
Previous Weekly High 1.1098
Previous Weekly Low 1.1014
Previous Monthly High 1.118
Previous Monthly Low 1.0879
Daily Fibonacci 38.2% 1.1018
Daily Fibonacci 61.8% 1.1014
Daily Pivot Point S1 1.1012
Daily Pivot Point S2 1.1
Daily Pivot Point S3 1.0993
Daily Pivot Point R1 1.1031
Daily Pivot Point R2 1.1038
Daily Pivot Point R3 1.105

 

 

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