EUR/USD Implied Volatility Pops as Euro Crashes Party for H&S Sellers

EUR/USD Implied Volatility Pops explained by professional Forex trading experts the “EUR/USD Implied Volatility Pops” FX trading team.

EUR/USD Implied Volatility Pops

EUR/USD implied volatility hasn’t climbed to the top of the leaderboard, but less than two weeks ago one-month implied volatility was at its lowest levels since 2014, with a reading of only 5.49%. Since then it’s jumped to 7.59% and closing in on the highest level seen since September when it peaked at 8.68%. One-week IV has also risen sharply, moving from 5.12% to 7.38%. These sudden jumps in volatility are a welcomed event for traders and could mean we are in for a sustained period of larger price swings.

The ’head-and-shoulders’ pattern so widely-watched by market participants the past couple of weeks is in the process of getting shredded as yesterday’s powerful move ripped through the ‘neckline’ of the pattern, and in the process the trend-line running down off the September high was also broken. This opens up a path for higher prices, but the euro must first contend with an area of stiff resistance around the 2010 low at 11876. This has been a point of interest for both sides of the tape since August and a pullback off this area could certainly be in store, but if it’s a constructive pullback then a rally to higher levels becomes the probable scenario. If we see a pullback at all. A breakout above resistance will also constitute a higher-high from the October high and snap the downtrend sequence in place from early September.

Looking to projected high/low levels, one-week implied volatility points to a 1-stdev weekly range of 11715-11957. The projected low arrives above the ‘neckline’ and in an area of solid support dating back to August. If the euro is to continue higher it is unlikely to break below this important support zone and is viewed as spot likely to see ‘would-be’ longs take a stance. On the top-side, if the projected range-high is seen then a breakout above the aforementioned resistance in the 11876-area will have been clearly achieved, building a case for a move to the 12000/100 zone surrounding the 2012 lows.

EUR/USD Implied Volatility Pops Conclusion

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