EUR/USD — Perennial Range With Opportunities at the Extremes

7 Jan 2019

By drawing a volume profile from the onset of the eternal daily range between 1.15 and 1.1220, we can extract some valuable insights. We can observe how the majority of the volume ever since late October has been concentrated in a 1 cent range as depicted via the dash lines (1.1330–1.1430). That would be our micro range as guidance. Then we have the macro range delimited by 1.15 to the upside and 1.1270 to the downside. We will disregard the drop on Nov 12 as a one-off event which if accounted for would misrepresent the accuracy of the range measurement.

We can also see how the POC is found circa 1.14, which carries a fairly strong message, as it communicates than after months of interactions within the confined range, the perceived fair value within the range is largely skewed towards the upside. This strengthens the notion that any revisit of the lower end of the range, between 1.1330 and 1.1270 should continue to offer buy-side opportunities as has been the case throughout the duration of the range (see magenta arrows). Similarly, the interactions between 1.1430 and 1.15, given the weakening economic trends in the EZ, should continue to provide formidable selling opportunities, even if my conviction, due to the potential reversion in Fed’s policies and the German vs US yield spread, is not as strong.