The recent downfall in EUR/USD has a positive impact on other aspects of its trading: volatility has improved and so has its technical behavior.
Stronger volatility was clearly seen in the big Draghi drag: a range of 230 pips in one day is certainly good news after a long time of tight range trading.
The rise can also be seen in the volatility index, that emerged from the bottom. The Euro FX VIX is currently at 7.85, after bottoming out just above 4.50. Here is the chart:
In addition, the pair is trading at wider ranges when floating in range: range seem to have widened.
Technical behavior
Regarding technical behavior, this 30 minute chart of its recent movements shows that on the much needed bounce, the pair returned to the previous support line of 1.2920, using it as resistance.
After staying there for some time, the pair made a break higher, and yet again met previous resistance around 1.2950.
While the ranges are not 100% perfect, the movements are quite nice and the pair moves nicely. This is also an improvement to the previous choppiness.
Will this continue?
That’s a big question. September is often a month of big movements and this often helps technical behavior for some pairs. In the weeks to come we have the FOMC meeting and final GDP in the US among other events. In Europe, every public appearance of Draghi and his can move the markets, as uncertainty about the size of the ABS program remains unknown.
We are also seeing more movements in other pairs, partly as part of the surge of the dollar, and some for other reasons.
The most stark example is the fall of the British pound on worries about the Scottish referendum. This could intensify if Scotland indeed opts to leave and is set to reverse sharply in the more probable chance that the No campaign wins. But yet again, the question remains for the pound: will it return to tighter and choppier trading after the dust settles in Scotland?
What do you think?
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