Asian, European & US Sessions

Forex volatility Picks-up

Written by JS T Alexander | 01 September 2010

With the recent UK PMI disappointing nine-month low prompted the GBPUSD to continue to move lower currently at the 1.5370 from a low at the 1.5330 which led other traders and investors to shift currency pairs to the EURUSD and back to the AUDUSD as an arbitrary hedge strategy against the weaker USD. Supporting this Market View Analysis:

FX Volatility on EURGBP Cross Rate - LIVE
Youtube URL:http://www.youtube.com/watch?v=rkZx9-NxHkY 

Whereas the USD index is now at the 82.77 bp levels and a probable continuation lower would be made. With the EURO leading the majors as an alternate currency flight to quality whenever the USD heads lower with some alternative trades with the appreciating Gold prices now back nearing it s all time high USD 1265.05.

As the EURGBP cross rates has reacted higher whenever a contradictory movement is made between the two major pairs as it made it recent hourly high at 0.8315 at the start of the 1st trading day of the new month with accelerated volumes. Strength of the Euro vs the USD and the Pound will continue to the 0.8350-60 level of resistance on a day to day basis. However, continued strength will prevail whenever the Euro accelerates and the continuing USDX still heads lower.

Meanwhile, the USDCAD corrective move has been limited to the 1.0553-80 levels whjile maintaining its higher movement in a slower pace. do expect that this will also continue while making these slight corrective moves before it resumes its trend higher. We still remain bullish with intraday corrections but should only be within the vicinity of the above stated lows with extensions on the lower band of 1.0495 - 1.0500 support.

As for the AUDUSD and the NZDUSD would apply the same scenario with intraday corrections no lower than the 0.8880 for the Aussie and 0.7040-50 levels for the Kiwi. Although, the intraday resistance that we are seeing right now for the Aussie at the 0.9040-85 levels are quie normal as the previous prices have proven to do the same and headed lower as corrective mode. The fourth attempt would normally prenetrate the trendline resistance with enough volume and momentum building towards today and tomorrow's movement for Friday's reports included.

The testimony of several key officials including Fed Chairman Bernanke with the Financial crisis panel would be an additional fundamental to watch as these will trigger an already vulnerable forex market. But the NFP would be a most dramatic fuel to ignite a deteriorating USD which we do anticipate to continue its directional trend lower for the first two weeks of this month towards the mid-month with heavier volumes from institutionals. The precaution in taking trades at a slower pace for those who are not as familiar with these kinds of market conditions, would be advisable to stay aside. As this is just the first trading days of the new month. And as we also mentioned that the mid-week overlap of prices, together with the futures would make this market behavior even volatile. Volatility would still pick-up as we head towards Fridays reports.