Implieds Tick Higher, Signaling Near Term Action

EURUSD - BREAKOUT

GBPUSD - BREAKOUT

USDJPY - BREAKOUT

USDCAD - BREAKOUT

USDCHF - BREAKOUT

AUDUSD - BREAKOUT

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EURUSD

Longer term implieds ticked higher during the week, after playing dead for the past two months.  Bucking the previous downtrend, the slight uptick is suggestive of a pick up in activity, leading to speculation of a breakout out of the tepid range conditions that have persisted.  Hovering the key support at 1.2500 currently, the price action is setting up for a major test as short term differentials have thinned out.  At this point, although a breakout is possible, the directional bias has not been established, and traders would be wise to see a failure of the floor before confirming the aforementioned notion.

GBPUSD

Pound sterling implieds followed the euro direction with longer term components rising above the extremely low levels that had been witnessed for most of September.  In addition, short term differentials have also thinned out, suggestive that a turn in the equation is in the works for the fourth quarter.  As in the euro visual, a confirming break or bounce at the key test of the 1.8500/1.8400 support area would be necessary, in conjunction with the reading, before labeling the impending change.  Subsequently, a consideration must be placed on the upcoming Bank of England decision, which is likely to pose as the underlyings key event risk.

USDJPY

Continually rising, the underlying spot price has run counter popular belief as dollar longs continue to build against the shortside for Japanese yen.  Seemingly reaching a top, a breakout scenario is building with the currency rising to a key technical test at the 120.00 resistance ceiling as the longer term implied component has reversed the declining trendline witnessed for most of the second and third quarters.  Finally bouncing off of the extreme levels, the longer term vols seem to be running in conjunction with the lighter differential which is indicative of a breakout scenario.  At this point, taking into consideration major near term barriers, a breakout would be defined by a break past the aforementioned level.  Conversely, failure of the 118 would define the downside conditional shift.

USDCAD

Coinciding with the uptick in the longer tem implied measure, the USDCAD currency pair has broken through the 1.1300 topside resistance level, setting up nicely for a rise higher to the 1.1400 handle.  In line with longer term implied activity, our short term differential has ticked positive and confirmed the increase in underlying volatility, suggestive of a breakout scenario.  However, much like in other major pairs for the week, a confirmed break above or below the impending test of the 1.1400 is necessary in confirming the conditional change.  Notably, the last time differentials were at this level, the currency temporarily broke through range conditions in July.

USDCHF

Contrary to the euro, for once, a pickup in volatility accompanied a technical break to the upside, as dollar strength powered through the 1.2600 handle.  Reversing the previously declining longer term trend, the implied measure rebounded from extreme levels, keeping the differential thin.  Now approaching the key resistance at 1.2700, a break above would likely boost both components higher, turning the short term differential positive and confirming the breakout suggestion.  However, a failure may, in turn, reverse the weekly increase, temporarily, before a more directional bias can be established.

AUDUSD

Range bound suggestions continue for the Aussie as the longer term implieds continue to dwell in the cellar, lingering below the 7.50 measure.  However, suggestively positive, the implied differential is continuing to narrow, likely preceding a short term pickup in the longer term component.  The underlying readings coincide with the current range bound assessment in the market with the pair just coasting between 7500 and 7400.  Should implieds spike positive, the pairs reaction ma be short and temporary as the range is a narrow 100 basis points with near term resistance and support directly located above and below.