EUR/USD: Volatility hit three-month low, eyes range breakout

The EUR/USD volatility, as represented by Bollinger Bands, has hit a three-month low.
The EUR/USD is stuck in a narrowing price range, a breakout to set the tone for the next big move in the common currency.

Omkar Godbole FXStreet Contributor

Currently, the EUR/USD pair is trading at 1.1687, having hit a high of 1.1750 yesterday.

The daily chart shows the pair has charted a narrowing price range over the last 5-1/2 weeks. Consequently, the volatility as represented by the gap between the Bollinger Bands (standard deviation of +2,2 on the 20-day moving average) has dropped to 0.017, the lowest level since April 24.

EUR poised for a big move

An extended period of low volatility is often followed by a big move in prices (bullish/bearish) and the asset develops a trend in the direction of the breakout.

Accordingly, the common currency could see a big move, having spent more than five weeks in a narrowing price range. A bullish breakout would confirm the sell-off from the Fen high of 1.2586 has ended. On the other hand, a downside break would put the bears back into the driver's seat.

The pair may turn volatile following the release of the preliminary Eurozone PMI numbers today. However, the range breakout is more likely to happen after Thursday's ECB rate decision.

EUR/USD Technical Levels

Resistance: 1.1752 (range resistance), 1.1791 (July 9 high), 1.1852 (June 14 high).

Support: 1.1685 (50-day MA), 1.1575 (July 19 low), 1.1508 (June 21 low).

	TREND INDEX	OB/OS INDEX	VOLATILY INDEX
15M	Strongly Bearish	Neutral	High
1H	Bullish	Oversold	Low
4H	Bearish	Neutral	Shrinking
1D	Strongly Bearish	Neutral	Low
1W	Bearish	Neutral	Expanding
Updated Jul 24, 04:00 GMT

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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