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Forex pairs in this Article » EUR/USD, GBP/USD, USD/JPY
- Dollar trades at key technical resistance levels

- Forex volatility prices have dropped from recent highs

- We see low odds of Dollar continuation, range trading strategies are our preference

The US Dollar saw an impressively volatile week versus the Euro, Japanese Yen, and other major counterparts. Yet big moves seem much less likely in the week ahead; a significant drop in forex volatility prices s shows traders are positioned for much smaller Dollar price swings.

Why does this matter? The Dollar itself remains strongly correlated to these volatility prices, and low vols generally favor USD weakness. It’s also important because we know that certain FX trading strategies and techniques will tend to do well in low-volatility environments, while others may do poorly in the same conditions.

Forex Volatility Prices Have Dropped, Pointing to Slower Market Moves Ahead

forex_strategy_US_Dollar_Rally_Might_Fizzle_body_Picture_1.png, Dollar Rally Might Fail as Volatility Drops - What Are we Trading? Source: OTC FX Options Prices from Bloomberg; DailyFX Calculations

We’ll look to trading systems that tend to do well in quiet markets—notably our sentiment-based Range2 trading strategy. Past performance is NOT indicative of future results, but said system has placed a number of successful trades through recent low-volatility trading conditions.

To a lesser extent we’ll follow our trend-following Momentum2 trading strategy. This system has outperformed as of late and could continue to do well.

The key risk to Momentum2 and our other trend-following trading strategies is simple: a slowdown in market moves typically hurts our trend-following trading systems.

See full detail on our trading biases in the table below, and sign up for e-mail updates via my distribution list for any changes.

DailyFX Individual Currency Pair Conditions and Trading Strategy Bias

forex_strategy_US_Dollar_Rally_Might_Fizzle_body_Picture_2.png, Dollar Rally Might Fail as Volatility Drops - What Are we Trading? forex_strategy_US_Dollar_Rally_Might_Fizzle_body_Picture_3.png, Dollar Rally Might Fail as Volatility Drops - What Are we Trading? Automate our SSI-based trading strategies via Mirror Trader free of charge

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