Choppy price action out of key forex pairs has made it difficult to establish clear strategy biases through recent trade. The Euro/US Dollar pair has in particular stuck to a narrow 150-point range through the past several weeks of trading, and our earlier calls for a continued EURUSD downtrend have not come to bear. Forex options markets volatility expectations nonetheless remain elevated and point to noteworthy price swings. As such, we will maintain a bias towards volatility-friendly systems unless implied volatility levels drop noticeably in the weeks ahead.

US Dollar Direction Could Be Decided on Nonfarm Payrolls Report

Euro’s Attempt at a Recovery Rides on the Dollar, Investor Confidence

Japanese Yen at the Crossroads as the BoJ Discusses Intervention

British Pound Looks To Manufacturing Data For Support

Canadian Dollar Has Little to Look Forward to in GDP Release

Australian Dollar Outlook Weighed By Interest Rate Expectations

New Zealand Dollar at Clear Risk Ahead of US Labor Data

Gold May Extend Slow Ascent as Market Uncertainty Prevails

EURUSD: Remain Short Amid Retracement

GBPUSD: Short Position Sought on Rebound

USDJPY: Long-Term Bias Remains Bullish

USDCAD: Remain Long as Rally Stalls

AUDUSD: Selloff Pauses, Bias Still Bearish

NZDUSD: Sellers to Return After Correction

Some of the most popular trading strategies in forex markets involve the use of Japanese Candlestick charts. Given a specific pattern in candlestick formations, traders look to buy and sell currencies in anticipation of reversal or continuations in price. Yet testing the profitability of such concepts is easier said than done. We will attempt to quantitatively identify specific candlestick patterns and view historical performance of trading on said candlestick signals.

EURUSD – Euro Forecast Modestly Bullish Against USD

GBPUSD – British Pound Bias Calls for Strength

USDJPY – Japanese Yen Forecast to Gain Further

USDCHF – Swiss Franc Likely to Strengthen against Dollar

USDCAD – Canadian Dollar May Fall Against US Dollar

GBPJPY – British Pound Forecast to decline Against Japanese Yen

View individual currency SSI charts in our FX Sentiment section

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Some of the most popular trading strategies in forex markets involve the use of Japanese Candlestick charts. Given a specific pattern in candlestick formations, traders look to buy and sell currencies in anticipation of reversal or continuations in price. Yet testing the profitability of such concepts is easier said than done. We will attempt to quantitatively identify specific candlestick patterns and view historical performance of trading on said candlestick signals.

It is one of the most dependable fundamental correlations Forex traders have to work with: as one of the market’s favorite safe haven currencies, the US dollar moves inversely to risk appetite. Yet, this unfailing link clearly broke down Tuesday under a significant shift in risk appetite – exactly when we would expect the connection to be the strongest.

Continued US Dollar and Japanese Yen strength makes trend-following forex trading strategies attractive through upcoming trade. Indeed, our algorithmic trading strategy bias remains unchanged from last week’s report when we made a similar argument for USD and JPY gains. A more recent decline in forex options market volatility expectations raises risks that currencies may return to smaller trading ranges. Yet we are hopeful that a Euro/US Dollar break below the psychologically significant 1.2700 mark could invite renewed US Dollar strength.

Currency markets remain anchored to risk sentiment, with the path of least resistance pointing to continued risk aversion as the week’s round of US economic data threatens to further undermine investors’ confidence in the continuity of the global recovery.