Click here for PDF version

EURUSD <?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Short term implieds on the Euro remained unchanged on the week, while comparative actual volatility dipped ever so slightly.  The decline in the latter kicked the spread differential slightly higher on the week, as the spread between the two components narrowed.  Subsequently, the reading comes before the testimonial by Fed Chairman Ben Bernanke, leaving plenty of upside potential in the spread.  Should the upper barrier be tested and potentially broken, this would suggest a continuance of a wider range bound scenario that has kept the pair between the 1.2800 and 1.2500 figures till further event risk later next week.

GBPUSD

Things were comparably different for the British pound as the actual volatility measure rose further above the implied vol.  Rising 13 percent higher on the week, the actual print now eclipses the smaller implied figure, leading the spread differential through the lower barrier test.  Suggestive of a range bound scenario, the trader would be wise to wait for a pull back above, confirming the notion.  Subsequently, this places the current spread wider, almost double the previous weeks measure, and even further in negative territory.  Until a pullback, it remains reasonable to say that the price action is likely to keep in tandem with euro based action, ranging scenarios, locked in between the 1.8200 and 1.8500 figures.

 USDJPY

The spread widened for the Japanese yen vols as implieds declined on the week versus comparable actuals that rose the second highest of all the majors.  Increasing almost 10 percent on the week, actuals climbed to take the overall differential lower through the lower barrier test as implieds actually dipped following the previous weeks event risk, the Bank of Japan rate decision.  The situations have now widened the spread above the previous weeks by a staggering 176 percent.  This scenario sets up nicely for a breakout scenario, which would coincide with currently rising market sentiment of sharp Yen appreciation.  However, at this point, as in similar situations, a pullback would be necessary in order to fully confirm the potential.

USDCHF

Similar to Euro spreads, implieds and actuals kept steady in the Swiss franc neck of the woods.  The weeks inactivity kept the spread safely between both barriers, locked in neutral territory and offering no directional bias.  However, given the weeks full schedule of events and likely focus on the week ending Empire State Manufacturing survey, implieds may very well tick slightly higher, leaving upside potential for our model.  Subsequently, the inactivity has spurred the spread to advance higher and closer to positive territory, joining only the Aussie and Euro in the proximity.

 USDCAD

The only major spread to sport a positive reading, the Canadian dollar differential has risen above our upper barrier test to confirm the current range bound scenario in the spot market.  Surprisingly attributed to the uptick was a precipitous drop in actuals for the week.  The measure declined 25 percent on the week, leaving the actual measure far below the implied component and puts the total measure further into positive territory.  The spread is now the only major to achieve this in the week, reinforcing the potential for a confirming pullback.  Coincidentally, the reading matches the 1.1200 and 1.0900 figures that have kept the price action steady with the current reading hovering slightly above the 1.1300 resistance.

AUDUSD

Making the second most progress of the major set, the Australian dollar spread rose a full point on the week according to the spread differential.  Attributed to the spike was a drop in actuals, the second ranked downer on the week as the component lost 13 percent.  On the overall scale, this now brings the spread closer to positive territory, ever closer compared to the previous weeks measure.  The current scenario should change, giving way to some directional bias, as sentiment grows of a potential round of rate hikes as early as August.