EURO PRICE FORECAST: EUR/USD, EUR/GBP, EUR/JPY, EUR/CAD, EUR/AUD
- Several high-impact economic data releases on the Euro-zone are set to be released over coming days and brings the Euro into the spotlight for potential volatility
- Forex options traders have been moving toward a more bearish stance regarding EUR price action as evidenced by declining Euro risk reversals
- For more on the Euro, check out this recent forecast on EURNOK, EURSEK, EURNZD
The Euro is ripe for potential currency volatility over the coming days considering several key economic indicators on the Eurozone are scheduled for release. Specifically, EUR price action could be at risk of experiencing outsized moves in response to employment data, inflation figures and a GDP report on tap to cross the wires this Thursday and Friday.
EURO – FOREX ECONOMIC CALENDAR
Eurozone employment, inflation and GDP data can have a major influence on the direction of the Euro seeing that the heavy-hitting economic indicators likely carry a high degree of significance at the European Central Bank (ECB) with regard to future monetary policy decisions.
EUR PRICE LEVELS TO WATCH: EURO IMPLIED VOLATILITY & TRADING RANGES (1-WEEK)
Despite intimidating event risk detailed on the Forex Economic Calendar, options-implied volatility for the Euro and other major currency pairs remains notably suppressed.
Nevertheless, expected activity in spot EUR/USD, EUR/GBP, EUR/JPY, EUR/CAD and EUR/AUD could easily climb higher if the swath of economic data releases and other fundamental catalysts standing to impact Euro counterparts (like a BOE interest rate decision or US GDP) domineer EUR price action.
EUR/USD PRICE CHART
That said, EUR/USD 1-week implied volatility rests at extreme lows with a reading of 3.63%. Correspondingly, spot EUR/USD is estimated to fluctuate between 1.0952-1.1062 with a 68% statistical probability given its latest 1-week implied volatility measurement.
EUR/GBP PRICE CHART
EUR/GBP is expected to be the most volatile Euro currency pair over the next week judging by its 1-week implied volatility reading of 6.58%, which is slightly under its 20-day average of 6.59 percent. The lull in volatility comes as the Brexit saga – now in its third year – looks to close its latest chapter with the UK Withdrawal Agreement set to go into effect on January 31.
EUR/JPY PRICE CHART
Looking at EURJPY, its 1-week implied volatility reading is relatively high when compared to the average reading over the last 20 trading days. The Euro recently gapped down against the anti-risk Japanese Yen as Coronavirus fears gripped markets. If economic data comes in above expectations for the Euro-zone, however, traders might expect spot EUR/JPY prices to move higher as long as the situation in China doesn’t make a turn for the worse.
EUR/CAD PRICE CHART
EURCAD has moved lower since the turn of the year. The Canadian Dollar has suffered as oil prices have declined on demand side issues stemming from skepticism over the expected rebound in global GDP growth this year. The latest options pricing for EURCAD details a 4.17% implied volatility reading for the 1-week contract, which is slightly beneath its 20-day average.
EUR/AUD PRICE CHART
Moving onto the EURAUD, the Euro has enjoyed relative strength recently amid Coronavirus panic, which has injected weakness into the pro-risk Australian Dollar. One-week implied volatility in the cross is currently at 5.87% and compares to its 20-day average of 5.30%. Strong data out of the Eurozone or further deterioration in market sentiment could propel the pair higher over the next couple days.
CHART OF EURO RISK REVERSALS
A risk reversal reading above zero indicates that the demand for call option volatility (upside protection) exceeds that of put option volatility (downside protection).
–Written by Thomas Westwater, Analyst Intern for DailyFX.com
Contact and follow Thomas on Twitter @FxWestwater