- US Dollar testing critical resistance, poised for break higher
- Forex volatility prices show that markets are on the verge of key shift
- Our focus remains on key US Dollar and Yen pairs
The US Dollar is on the verge of a major break higher, and these are the currency pairs we believe are most likely to see big moves.
Traders continue to buy the Greenback versus the Euro, Sterling, and other major counterparts as the Dow Jones FXCM Dollar Index trades into critical resistance. The key question becomes whether this is indeed the start of a much larger breakout. If it is, our focus shifts to Dollar trades against the Sterling and the commodity dollars.
Dollar Index Testing Critical Resistance as Volatility Rises
Source: FXCM Trading Station Desktop, Prepared by David Rodriguez.
Forex volatility prices indeed suggest we are at a potentially significant turning point in market conditions. Markets show that prices on long-dated volatility are setting a series of higher highs and higher lows. It’s obviously early still—particularly as volatility remains in a clear 6-year downtrend—yet the recent recovery off of record-lows makes this an important early warning sign.
Forex Volatility Prices Show Early Signs of Lasting Reversal
Data source: Bloomberg, DailyFX Calculations
We thus look to individual dollar pairs for potential trades, and a recent look at FX positioning suggests that the GBPUSD, AUDUSD, NZDUSD, and USDCAD may offer good opportunities to get long the US Dollar.
According to CFTC Commitment of Traders data, large speculators are heavily long the US Dollar versus the Euro and the Japanese Yen. EURUSD-short and USDJPY-long positions thus look a bit crowded, but the same data shows that traders are actually still net-short the Greenback versus the GBP, AUD, NZD, and CAD. All else remaining equal, this suggests that the Dollar has further room to run versus these currencies.
If this is indeed the start of a larger Dollar breakout, these become our favored trades. See the table below for full rundown on a per-currency pair basis and keep track of changing conditions with future e-mail updates via my distribution list.
DailyFX Individual Currency Pair Conditions and Trading Strategy Bias
Automate our SSI-based trading strategies via Mirror Trader free of charge
Investing NewsChina’s forex reserves dropped by a record $93.9 billion at the end of August to $3.56 trillion because the Central Bank has been selling dollars to provide a cushion to the falling yuan
ForexAmid the rising economic power of India, the talks of making the Indian currency fully convertible are gaining momentum. We look at the pros and cons.
Forex FundamentalsAs the world's second largest economy, China's challenge to America’s dominance includes a push to make the yuan (RMB), the world’s reserve currency. Whether it can do that now is unclear.
EconomicsOne particular barrier to trade that has received much attention of late and caused delays in negotiations of the TPP is exchange-rate manipulation, by which a country artificially devalues its ...
ForexBreaking news moves forex markets. Here are the top U.S. sites for tracking forex news.
InvestingAccess to financial information has grown with the expansion of digital news. Bloomberg and Thomson Reuters lead the pack, claiming a majority of the business information market.
EconomicsSouth Korea is the latest country to cut interest rates in an attempt to stimulate economic growth.
Forex EducationPeer-to-peer (P2P) currency exchange networks offer a viable and cheaper alternative for buying and selling currencies.
ForexHere is a simple breakdown of how to open an offshore forex account for US-based users, including legal requirements.
EntrepreneurshipA brief overview of the top apps that help forex traders with on time information, charts and more.