Currency Spot Price Barometer Reading
EURUSD 1.2846 BREAKOUT
GBPUSD 1.9006 BREAKOUT
USDJPY 115.85 BREAKOUT
USDCAD 1.1161 RANGE
USDCHF 1.2276 BREAKOUT
AUDUSD 0.7686 RANGE
EURUSD
Continuing in summer fashion, longer term implieds declined once again during the week, as the differential additionally dipped through the zero line. With volume and interest remaining light, active fluctuations have been kept to a minimum in the underlying euro, restricting it to an overall range bound scenario. This range has been dictated by support floors at 1.2500 and upside ceilings of 1.2900. Technically, the 1.2900 resistance has held strongly as tested in last weeks action and looks like to remain given the current environment. However, with consumer price index reports for the region being released tomorrow, the market may witness another test of the 1.2900 figure. A break here would constitute a momentum following as vols are sure to rise off extreme lows. For the record, the last time we saw extreme levels in the measure, the spot price bounced from the 1.2500 support. Comparatively, the results may be signaling another turn.
GBPUSD
Remaining supported, the longer term vol measure in the British pound looks to turn higher in the course of next week as price action has followed a break above the 1.8800 support figure. However, the suggestion remains somewhat questionable given the spread dip through the zero line, signaling a calming in the short term volatility measure. However, in comparison, the last time declines were seen at this level, the short term pickup was enough to give the underlying a short term lift. Not considering this as a repeated situation, the suggestion may in fact be for a turn, with most of the market siding with an overbought currency pair.
USDJPY
Japanese yen vols continued to decline on the week, driving the implied differential lower through the zero line and reflecting the thinned interest as the summer winds down. However, in much the same fashion as previously mentioned majors, with the measure at such extremely lower levels, activity and interest in the pair is imminent. Noting the chart, the currency pair declined in favor of the yen to the tune of 300 pips the last time vols were at such a level. Technically speaking, the reading additionally coincides with the head shoulders pattern that is forming as the 116.73 figure is offering a lot of topside resistance. Any further event risk for the week is likely to be kept to the department store sales reports for the week.
USDCAD
Declining on the week, Canadian dollar implieds continued to reflect a dampened environment as the longer term measure dipped slightly below the zero line. In line, the spread differential additionally declined as short term activity has been reduced to a near term lull with the currency pair remaining in a range bound environment between 1.1000 and 1.1400. However, of note, the pair is currently testing the 1.1200 support floor which looks to give way to a continuation of the predetermined channel. Nonetheless, with both measures looking downtrodden, the pair looks to keep its barriers for the near term. The international securities transactions report is likely to offer a temporary jump in the pair, albeit minimal, with nothing left but wholesale sales to cap the week.
USDCHF
Swiss vols declined in similar fashion to the Euro counter, keeping the underlying currency pair in a range bound environment. Comparably, the pair has established support floors at the 1.2200 with comparative resistance above at the 1.2500 figure. Should European consumer price reports be released to the upside, Euro bullishness is likely to spill over into the Swiss underlying. Fundamentally, this would coincide with recent comments by central bank Chairman Roth that the Swiss franc seems slightly weaker than expected. Technically speaking, with regards to the Euro, Swiss tests are likely to come to the 1.2200 figure.
AUDUSD
Laying low, volatilities have continued to remain calm in the Australian dollar currency pair. Trading in narrow channel, the underlying pair is reflective of the lull that is the implied measure in the current environment. However, as in previously mentioned pairs, a pickup in activity is likely ahead as we trail off into the end of summer and directional bias becomes more consistent. Average weekly wages and comment by Reserve Bank of Australia Governor Ian McFarlane are likely to give the measure a boost in the near term. However, the support may be minimal at best given dominance of dollar fundamentals.
