Forex market volatility expectations remain nearly unchanged on the week, leaving little scope for sustained volatility out of the US Dollar and key counterparts. In past weeks we’ve argued that limited forex option market implied volatility levels suggested that the US Dollar would in fact hold its lows. Despite sharp intraday moves, the Greenback has in fact held its 2009 troughs against the Euro and other key counterparts. Given relatively muted short-term vols, we suspect that the USD will continue to hold major support. Of course, that does not preclude any short-term declines.
The US Dollar is trading considerably lower to start the week's trade, but this has tellingly failed to boost short-term volatility expectations. Given that the Greenback now trades near the bottom of its recent trading range against key counterparts, subdued implied volatility suggests that further breakdowns are somewhat unlikely. With this in mind we've shifted our main bias towards Range-based systems, but our Breakout strategies' recent resilience suggests it may survive despite small price moves.