USDOLLAR’s Low Volatility May Be The “Calm Before The Storm”


USDOLLAR Trading Range

FXCM's USDOLLAR basket has been moving sideways since the end of November (blue rectangle). Moving averages are trend-following indicators and are inclined to give whipsaw signals when the price is ranging (aqua ellipses). We note that the quicker green moving average has just crossed above the intermediate orange moving average (blue arrow). This aligns the moving averages bullishly, and if they develop angle and separation will be suggesting an increase in bullish momentum. However, given the trading range over the last month, we are mindful that this may be another whipsaw and continue to monitor.

Past Performance: Past Performance is not an indicator of future results.

Volatility Squeeze

Below we show the same daily chart except with a Bollinger band overlay. The sideways movement over the last month has resulted in a narrowing of the Bollinger bands (green rectangle). Bollinger's theory suggests that a squeeze precedes an expansion in volatility. However, the theory has little to say about the direction of the expansion. In this regard, we include an RSI, which is above 50 (black rectangle). This is the bullish side of the indicator, denoting positive momentum. If the RSI drops below 50, the momentum will be in danger of turning bearish. However, as long as the RSI maintains a reading above 50, any volatility expansion is likely to have an upside bias.

Past Performance: Past Performance is not an indicator of future results.

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Russell Shor

Senior Market Specialist

Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.


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Past Performance: Past Performance is not an indicator of future results.

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