Here’s How We Like Trading
- Dollar weakness looks likely to continue on extremely one-sided sentiment
- Extraordinarily low volatility and a high-flying S&P 500 likewise favors USD losses
- We like trading via our sentiment-based trading signals as they sell the US currency
On Friday we highlighted the reasons that leave us in favor of selling into US Dollar weakness and indeed we prefer using our sentiment-based trading strategies to trade the Dollar lower until further notice.
To summarize our arguments: extremely one-sided crowd sentiment, strong rallies in the US S&P 500 and other global equities and very low FX market volatility all favor weakness in the safe-haven US currency.
Forex Volatility Prices Continue to Tumble, Favoring Slow-Moving Markets
Source: OTC FX Options Prices from Bloomberg; DailyFX Calculations
Our trading preference thus remains with our trend-following Momentum2 trading strategy until further notice. It’s certainly possible that low-volatility conditions could mean that the US Dollar fails to hit further lows. Yet we likewise note that the safe-haven US currency tends to do poorly as vols decline.
Our strategy trading biases are listed in full detail in the table below.
DailyFX Individual Currency Pair Conditions and Trading Strategy Bias
-- by David Rodriguez, Quantitative Strategist for DailyFX.com