The mid-July peak of 1.1275 traded outside the upper band of the 21-day simple moving average (SMA) based Bollinger Band.
After it closed back inside the band, it opened up a bearish run over the next few days as discussed here at the time.
Not surprisingly, the width of the Bollinger Bands has narrowed as the price has retraced. This indicates that historical volatility has decreased. This is a measure of the price action in the past.
At the same time, the one month at the money (ATM) implied volatility has been ticking higher.
It has climbed back over 7% this week after visiting below 6% in June. This is the market pricing of forward-looking price volatility.
This should not come as a surprise given the event risk this week with monetary policy meetings for both the Federal Reserve and the European Central Bank.
After closing back inside the aforementioned Bollinger Band, it has since confirmed an Island Reversal pattern after it broke below 1.1133, as highlighted here last Friday. A move back above 1.1133 would negate this signal.
An Island Reversal occurs when there is a gap in price action that extends the bullish or bearish trend. After the price reaches its zenith or nadir, the price action then makes another gap in the price in the opposite direction to where the first gap occurred.
If the Island Reversal is unwound, the 1.1275 – 80 area may offer resistance as the high there on July 18th coincides with some historical breakpoints.
EURUSD
BUY 1.1030 - 1.1050 💯💯
✅ TP1: 1.1100
✅ TP2: 1.1120
🛑 SL: 1.1030
After it closed back inside the band, it opened up a bearish run over the next few days as discussed here at the time.
Not surprisingly, the width of the Bollinger Bands has narrowed as the price has retraced. This indicates that historical volatility has decreased. This is a measure of the price action in the past.
At the same time, the one month at the money (ATM) implied volatility has been ticking higher.
It has climbed back over 7% this week after visiting below 6% in June. This is the market pricing of forward-looking price volatility.
This should not come as a surprise given the event risk this week with monetary policy meetings for both the Federal Reserve and the European Central Bank.
After closing back inside the aforementioned Bollinger Band, it has since confirmed an Island Reversal pattern after it broke below 1.1133, as highlighted here last Friday. A move back above 1.1133 would negate this signal.
An Island Reversal occurs when there is a gap in price action that extends the bullish or bearish trend. After the price reaches its zenith or nadir, the price action then makes another gap in the price in the opposite direction to where the first gap occurred.
If the Island Reversal is unwound, the 1.1275 – 80 area may offer resistance as the high there on July 18th coincides with some historical breakpoints.
EURUSD
BUY 1.1030 - 1.1050 💯💯 ✅ TP1: 1.1100
✅ TP2: 1.1120
🛑 SL: 1.1030
