Forex Strategy Outlook: US Dollar Breakout Boosts System Performance

A sharp US Dollar rally has left our forex trading signals in an attractive position to start the week’s trade, with Momentum and Breakout systems buying into positive USD momentum and sitting on respectable profits. As we discuss in our US Dollar weekly forecast, conditions remain ripe for a broader US Dollar and Japanese Yen recovery. As such, we remain bullish these key currencies and believe that trends will continue through near-term trade.
The risk remains that the US Dollar and Japanese Yen will subsequently retrace and remain in longer-standing ranges—forcing losses in our trend-following Momentum systems. Especially low volatility expectations highlight said risks, and our 1-week Volatility index currently trades at its lowest levels since September, 2008. We remain bullish the US Dollar but urge caution in gauging shifts in market dynamics.

Forex Trading Automated Systems Outlook
DailyFX+ System Trading Signals – Momentum2, Breakout2, and Range1 trading strategies remain as our top performers in the past 60 days of trade. We are nonetheless mindful that that Momentum2 and Breakout2 trades may underperform if currencies begin trading within wide ranges. The US Dollar breakout clearly bodes well for these key strategies, but there remains clear resistance in the way of further USD appreciation. Of note in the EUR/USD, the 1.2940 mark represents the 61.8 percent Fibonacci retracement of the 1.2430-1.3750 advance. If it drops below said level, a return to 1.2430 seems likely.

It will nonetheless be important to monitor US Dollar pairs through the near term and manage our trading biases accordingly. For the moment, we favor Momentum2 trading signals. Yet we remain mindful that low volatility will set up better range trading opportunities.