Forex market conditions continue to shift rapidly, and sharp intraday price movements across major forex pairs has made for difficult trading conditions through recent price action. Despite consistently sharp price movements, our Breakout trading signals have underperformed as of late. Major currencies continue in wide trading ranges, and the EURUSD and GBPUSD’s failures to make new highs hurts the probability of some of our trade signals. That said, our Range Trading systems have clearly turned profitable and may present reasonable opportunities through the near term.
Forex Trading Automated Systems Outlook
DailyFX+ System Trading Signals – Elevated forex market volatility typically bodes well for our “Breakout” systems, but intraday breakouts in price have not necessarily translated into breakouts from longer-term trading ranges—hurting the returns from our “Breakout” signals on DailyFX+. We actually see that our “Range2” system has outperformed in the past several days of trade despite sharp intraday price movements. In terms of outlook, however, we believe that “Breakout” signals will once again outperform on increased uncertainty surrounding FX markets.
Forex Discretionary Strategy Outlook
Speculative Sentiment Index Trading Signals – Our Speculative Sentiment Index signals have captured respectable profits as of late, but we see that a sharp drop in open interest across major currencies may weaken the strength of individual currency signals. Visit our Forex Trader Sentiment and Positioning Thread on the FX Forum to discuss these signals.
Dynamic Carry Trade Basket – Please see our weekly report on Carry Trades for a better idea on what to expect through short-term trade: Forex Carry Trade Outlook.
DailyFX+ Forex Market Conditions Outlook
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 three months 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.
Trend – This indicator measures trend intensity by telling us where price stands in relation to its 90 trading-day range. A very low number tells us that price is currently at or near quarterly lows, while a higher number tells us that we are near the highs. A value at or near 50 percent tells us that we are at the middle of the currency pair’s quarterly range.
Range High – 90-day closing high.
Range Low – 90-day closing low.
Last – Current market price.
Strategy – Based on the above criteria, we assign the more likely profitable strategy for any given currency pair. A highly volatile currency pair (Volatility Percentile very high) suggests that we should look to use Breakout strategies. More moderate volatility levels and strong Trend values make Momentum trades more attractive, while the lowest Vol Percentile and Trend indicator figures make Range Trading the more attractive strategy.
The information contained herein is derived from sources we believe to be reliable, but of which we have not independently verified. FOREX CAPITAL MARKETS, L.L.C.® assumes no responsibility for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person’s reliance upon this information. FOREX CAPITAL MARKETS, L.L.C.® does not warrant the accuracy or completeness of the information, text, graphics, links or other items contained within these materials. FOREX CAPITAL MARKETS, L.L.C.® shall not be liable for any special, indirect, incidental, or consequential damages, including without limitation losses, lost revenues, or lost profits that may result from these materials. Opinions and estimates constitute our judgment and are subject to change without notice. Past performance is not indicative of future results.
