Breakout Suggestions Persist In Dull Conditions

EURUSD - BREAKOUT

GBPUSD - BREAKOUT

USDJPY - BREAKOUT

USDCAD - RANGE

USDCHF - BREAKOUT

AUDUSD - BREAKOUT

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Although the underlying spot price hasnt really budged, the volatility measure has declined throughout the week.  Reflective of a slow start to the end of the year, activity looks to be crimped by wide hesitance ahead of the G7 meeting this upcoming weekend.  Nonetheless, with readings at these extreme levels, a breakout scenario continues to persist according to our model.  The differential has dipped to levels that have been seen throughout the end of August and most of September, increasing the probability of the aforementioned scenario.  The longer term has also confirmed the notion, declining to previously low levels.  Subsequently, a key level to be attuned to is the 1.2600 handle with upside potential above the 1.2950 resistance.

GBPUSD

Sterling volatilities followed the major trend with the underlying currency fluctuations being capped at a minimum while the volatility measures declined, slowly but surely.  The longer term measures decline has become steeper now with the differential dipping for a retest of previously lower levels seen in the beginning of the month.  Nonetheless, as with the Euro scenario, a breakout potential exists as the underlying currency hovers on a critical support level.  Notably taking a look back, the last time, figures were seen at this level in the longer term, the underlying spot reversed and broke out of a channel to approach the previous 1.9000 handle test. 

USDJPY

The longer term volatility measure has succumbed to flatlining as the underlying currency remains indecisive in the near term.  With short term interest rather thin, the current market conditions have caused the differential to additionally decline.  Although the measure has pared back some extremely low figures, it has rebounded to make a test of the zero line towards weeks end.  As with the other majors, the G7 meeting is likely weighing in on the pair, keeping the volatility in the market weaker.  As a result, the underlying currency is setting up perfectly for a breakout scenario as the underlying pair approaches the upside test at the 118 figure.

USDCAD

Canadian dollar implieds remain uneventful on the week as the pair seems to be confined to an eternal range bound suggestion.  Even the implied differential seems caught in a channel that has persisted for almost 1 ½ months.  Heading into the middle of September, conditions seem likely to remain as the underlying currency approaches topside resistance at the 1.1250 figure.  A real test of a breakout scenario would likely isolate the 1.1400 figure.  However, according to our model that scenario is a long time coming.

USDCHF

Similar to the Euro perspective implied volatilities have declined throughout the week, leaving our model to conclude a breakout scenario continues to exist in the near term.  Dipping to extreme lows, both longer term and differential components remain at levels previously preceding breakout scenarios in the underlying currency pair.  Adding to a potential pop in both measures is the upcoming Federal Reserves interest rate decision next week.  Although already pricing in an end to the tightening campaign, subsequent comments by Chairman Bernanke are likely to lift markets should they offer suggestions otherwise.

AUDUSD

Components are additionally falling low in the implied measure for the Australian dollar.  Still below the zero line, the differential continues to suggest thin interest in the short term even as the summer season comes to a definitive close.  The longer term component is additionally laying low, but ticking up ever so slightly.   The models suggestions, as a result, continue to purport a potential breakout scenario.  However, in similar fashion with the majors, the current test above the support level at 0.7500 is key in seeing further indications of the aforementioned.