US Dollar depreciation has left our forex trading signals at an advantage through recent weeks, leading to clear outperformance in key trading strategies. Indeed, the Euro and other key currencies have reached multi-month highs against their US counterpart. Trend-following systems aggressively sold the US dollar into early declines and have clearly benefited from its continued downtrend.
Whether or not the USD continues to decline will be a key factor in whether Momentum-based trading signals can remain profitable. The biggest danger remains that currencies return to wide trading ranges—putting Momentum and Breakout systems at clear risk.
Forex Trading Automated Systems Outlook
DailyFX+ System Trading Signals – Momentum2, Breakout2, and Range1 trading strategies remain as our top performers in the past 60 days of trade. We are nonetheless mindful that that Momentum2 and Breakout2 trades may underperform if currencies begin trading within wide ranges. Specifically, a US dollar recovery could put key medium to long-term trading signals at risk.
It will nonetheless be important to monitor US Dollar pairs through the near term and manage our trading biases accordingly. For the moment, we favor Momentum2 trading signals. Yet this could easily change if we see signs of rangebound markets, and we will update our Forex Trading Strategy Outlook accordingly.
DailyFX+ Forex Market Conditions Outlook
NOTE: Data has once again been changed. Due to the ineffectiveness of the 30-day horizon, we are returning to the original 90-day time horizon.
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 30 days 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 30 trading-day range. A very low number tells us that price is currently at or near monthly 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 monthly 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.
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