Why Might the Euro Trade Higher?

03/24/2015 9:00 am EST

Focus: FOREX

David Rodriguez

Quantitative Strategist, DailyFX.com


David Rodriguez, of DailyFX.com, shares a video in which he discusses forex volatility strategies since last week was the single-largest week of euro trading volume in over three years. David also suggests which currency pairs are at especially high risk of major moves.



  • US dollar posts large bearish outside week reversal on key week
  • Evidence grows for a potentially significant EUR/USD turnaround
  • High volatility prices keep us focused on our Breakout2 trading strategy


Forex volatility prices remain high following a pivotal week for the US Dollar. Why do we think last week’s euro rally is the start of something larger?

Last week we saw the single-largest week of euro trading volume in over three years as the pair posted a sharply positive reversal off of key lows. And further evidence suggests could be the start of a larger rally, particularly as crowd sentiment turns sharply.

All of this occurred on a sharp jump on FX volatility prices as traders speculated on and hedged against big euro and US dollar moves. Our DailyFX Volatility Indices show that vols have fallen since last week’s multi-month peak as event risk is comparatively limited in the week ahead. Yet volatility remains elevated on an absolute basis and remains supportive of views for further currency swings.

Forex Volatility Prices Pull Back but Remain Elevated as Uncertainty is High

chart
Data source: Bloomberg, DailyFX Calculations
Click to Enlarge

The Trading Strategy Bias table below highlights which currency pairs are at especially high risk of major moves and strategies we believe appropriate to given market conditions. We are broadly shifting in favor of more volatility-friendly strategies given the fairly substantial shift in broader sentiment.

DailyFX Individual Currency Pair Conditions and Trading Strategy Bias

chart
Click to Enlarge

By David Rodriguez, Quantitative Strategist, DailyFX.com

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