EURUSD BREAKOUT
GBPUSD RANGE
USDJPY BREAKOUT
USDCAD RANGE
USDCHF RANGE
AUDUSD BREAKOUT
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EURUSD
Aside from a quick reversion in the vols spread from its deep contraction in favor of longer-termed implieds a few days ago, euro volatility has done little to change the position it has been in for over a month now. In fact, expectations for an eventual move from the EURUSD have met fresh record lows as was shown in the long-term implieds. However, a break and eventual turn to trend could still be in the works. Though the spread is showing little favor in a near-term break, underlying spot action is once again coming to cross roads. A triangle pattern has formed in EURUSD over the past three weeks, reflecting a consolidation period that will meet its apex in the next few days. The barriers to a strong run are still in place however as 1.2500 and 1.12635 represent sizable levels.
GBPUSD
As the British pound continues to produce modest swings against its US counterpart, vols continue to move lower and lower. Traders are growing ever more complacent in the possibility of a new 1000-plus point trend developing in the GBPUSD. Long-term implieds have moved to new lows, while the vols spread approaches par. Since rebounding to 1.8870, GBPUSD has made positioned itself in the middle of the range that is expected to fend off the start of any new trend, namely 1.9000 and 1.8500. For a breakout scenario to develop, spot would need to close in on 1.8870 or 1.8675; but the broader levels need to be surpassed for the return of longer vols.
USDJPY
Though long-term Japanese yen implieds are still higher than the levels printed at the end of September, the indicator continues to hover at record lows. Since the underlying USDJPY began its march higher in early May, the long-term gauge has consistently moved lower. This suggests that the market is growing increasingly doubtful that a continuation higher in spot will last. Confirmation of this sentiment will come from the first sharp drop in the underlying. If long-term implieds jump on a drop in the yens favor, as they did in the final days of July and the first few sessions of September, then it would likely add confirmation to the markets forecast of an eventual turn. Before the larger trend is determined however, a break would be need, and this will likely come with the 120 or 118 levels.
USDCAD
Canadian Dollar vols once again fell victim to the ranging nature of the underlying currency. In the first few weeks of October, long-term vols were making a commendable advance along with the large 300-point advance in USDCAD. Like the USDJPY, this correlation reveals that the market sees the most potential for a new, strong trend to the upside. The sharp retracement in the underlying, and subsequent drop in long-term vols, confirms this outlook. Recently though, long-term vols have stabilized as USDCAD begins to range between 1.13 and 1.12 while the spread approaches par, suggesting a small break is neigh. A move back towards the 1.1400 resistance level would quickly charge long-term implieds and could lead to the momentum needed to enter another bullish leg.
USDCHF
Like the Pound and Euro, long-term vols in the Swiss franc were reaching new lows this past week as USDCHF was relegated to the mid-point of its new range. Resistance comes in around 1.2750 with the recent swing high in the middle of the month, while support holds up around 1.2565 which held up to USDCHF advances from June to September. While the longer-term vols read is not likely to rebound from its lows without spot butting up to one of the aforementioned levels, a short-lived break could be in order according to the implieds spread. In the recent past, in this market of low volatility, a positive cross in the spread has often marked a turn in spot.
AUDUSD
Long-term Australian dollar implieds have reached extreme lows, suggesting the underlying move is loosing steam. Since the recent, 200-point run higher in the underlying AUDUSD, vols were able to level out but resumed the move lower soon after. This can partially be attributed to the four-session range that has set in with a modest 50-point peak-to-trough boundary. More broadly however, it is not hard to understand why the market is not expected a sizable move from the AUDUSD pair. In the last four months, the sharpest run the major could produce was 200 points in four sessions. For long-term implieds to finally pick up for a respectable run, a major turn move would need to evolve which is not likely to evolve unless 0.7700 or 0.7400 are broken in the process.
