US Dollar Momentum Offers Trend Trading Opportunities
Article Summary: Forex market volatility has fallen, but a strong US Dollar (ticker: USDOLLAR) uptrend suggests trend-trading strategies may do well in the week ahead.
DailyFX PLUS System Trading Signals – Forex market volatility has fallen from recent highs as the US Dollar (ticker: USDOLLAR) consolidates versus the Euro and other major counterparts. Yet the broader USD uptrend suggests that trend-following trades remain attractive in the week ahead.
The Dollar has been especially strong against the downtrodden Japanese Yen, and we accordingly believe that the USDJPY may continue to hit fresh peaks alongside other Yen crosses. Yet outlook versus “high-Beta” currencies such as the Australian Dollar and Canadian Dollar has been complicated by the noteworthy drop in forex volatility. Our Senior Technical Strategist believes the AUDUSD may consolidate before its next break lower.
Ultimately we believe that our trend-following trading systems (Momentum1 and Momentum2) could do well across particular currency pairs, while our breakout trading strategy (Breakout2) has become comparatively less attractive on the drop in vols.
Japanese Yen currency pairs remain bright spots for all of our sentiment-based trading strategies, and further JPY breakdowns should bode well for said systems.
DailyFX Forex Volatility Indices
Our FX Options-based DailyFX Volatility Indices have fallen from recent peaks, and the drop in vols suggests that major currency pairs may consolidate and move more slowly in the week ahead.
View the table below to see our strategy preferences broken down by currency pair.
Register for a free webinar on our Breakout-trading Breakout2 strategy on March 14
DailyFX Individual Currency Pair Conditions and Trading Strategy Bias
View how to automate the high-volatility Breakout2 Trading System via our previous article and webinar recording.
Auto trade the trend reversal-trading Momentum2system via our previous article and webinar recording.
Trade with strong trends via our Momentum1 Trading System and view an archived webinar
Use our counter-trend Range2 Trading system and view an archived webinar guide on automation
--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com
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Definitions
Volatility Percentile – The higher the number, the more likely we are to see strong movements in price. This number tells us where current implied volatility levels stand in relation to the past 90 days of trading. We have found that implied volatilities tend to remain very high or very low for extended periods of time. As such, it is helpful to know where the current implied volatility level stands in relation to its medium-term range.