US DOLLAR PERSPECTIVE: GBP / USD PRICE ACTION SURGES ON BREXIT DEAL CHATTER & STEERS DXY INDEX LOWER
- The US dollar fell on Wednesday, with bulls and bears battling over the direction of the dollar
- GBP / USD price action blew up 130 pips in the session due to Brexit business rumors
- O DXY Index could continue to mirror the pound-dollar as well as the VIX ‘fear meter’
The US dollar fell broadly during Wednesday’s trading session, with the USD price action turning down and undoing some of its recent gains. AUD / USD and NZD / USD linked to sentiment rose and were the best performers major currency pairs behind GBP / USD. The pound sterling, which makes up 11.9% of the DXY Index, rose more than 130 pips on the day in response to news from a Emerging Brexit Agreement.
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GBP / USD PRICE TABLE WITH US DOLLAR INDEX OVERLAY: 1 HOUR FRAME (DEC 18 TO DEC 23, 2020)
Graph by @RichDvorakFX created using TradingView
With Brexit Offers Chat taking the GBP / USD higher and the EUR / USD price action hitching a ride on the strength of the pound sterling, there may be potential for a return to the weakness of the US dollar and invalidation of the recent US dollar recovery attempt. This development, combined with conversations from US politicians potentially increasing coronavirus aid checks to $ 2,000 from the initially agreed $ 600, probably boosted the merchant’s risk appetite and lowered the US dollar with VIX index derived from S&P 500. The need for fiscal stimulus was highlighted by US economic data launched at the beginning of the session.
|
Change in |
Longs |
Shorts |
HI |
| Daily | 40% | 11% | 25% |
| Weekly | 67% | -14% | 17% |
PRICE PERSPECTIVE IN USD – IMPLIED VOLATILITY TRADING RANGE IN US DOLLAR (NIGHT)
Learn more about implied volatility trading strategies!
The US dollar’s implied volatility readings have cooled off a bit, judging by the deadline of the night. This is expected in the trading session on Thursday, however, in calm and light market conditions, usually observed on holidays. Reduced hours on Thursday on Christmas Day may result in relatively low volume and liquidity. GBP / USD is expected to be the most active primary currency pair and USD / MXN to be the most active secondary currency pair, with implied overnight volatility readings of 15% and 19.0%, respectively.
Keep reading – The 10 most volatile currency pairs and how to trade them
— Written by Rich Dvorak, Analyst for DailyFX.com
Connect with @RichDvorakFX on Twitter for a real-time view of the market