Forex Strategy Outlook: US Dollar Range Likely to Hold on Low Volatility

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.

Forex Trading Automated Systems Outlook

Our trading strategies had a fairly mixed week of performance, with fast-shifting market trends and conditions creating difficult conditions for any one strategy to excel. If anything, the Range2 system should have done the best through choppy price action; yet extreme SSI ratios prevented the system from entering into many trading opportunities. Given low volatility expectations, it stands to reason that Range2 should be a preferred strategy on limited scope for price breakouts. Yet the strategy has traded very little as of late, and we hope that it will become more active in the week ahead.