Almost a month has passed without strong trends in G10 FX. Ranges prevail, and our trendiness indicator, which measures aggregate strength of trend across the major USD and EUR-based crosses, has been lingering at its lows for the last three weeks.
October was quiet, but we think the odds favour a November break-out. First, we’ve now crossed the median duration of trendless episodes, defined as those belonging to the bottom quartile of the distribution for more than a week. By mid-November, the current episode would be in the top-10 least trending episodes since 2001, and by end-November it would be in the top-4 (chart). Second, there are plenty of event risks on the horizon. The US election outcome and fiscal cliff expectations, negotiations over Spain and Greece, and the growth outlook to year-end stand out as potential catalysts. Third, November and December have historically produced strong trends in FX, usually favouring dollar weakness.
Click here to read the full report: FX Daily
Deutsche Bank