Currency Traders Should Get Ready for a Big Move in the Dollar
Currency traders should brace for a large move in the dollar, if past periods of low volatility are a guide.
Over the last 25 years, there have been three previous troughs in the JPMorgan Global FX Volatility Index. Each time, the U.S. Dollar Index has moved around 10 percent over the subsequent 6-months, according to data compiled by Bloomberg. The volatility gauge is currently trading at its lowest in 5 years.
“We’ve seen this type of pattern show up a number of times before, and each time it did it preceded a major move,” in the dollar, wrote Callum Thomas, founder and head of research at Topdown Charts, in a note to clients. This is great “for both U.S. dollar bulls and bears…the only people it won’t suit is those who expect the U.S. dollar to spend the rest of the year stuck in that tight trading range.”