(MENAFN- DailyFX) CURRENCY VOLATILITY – TALKING POINTS1-week implied volatility for major forex pairs looks eerily low Ongoing trade war uncertainty, monetary policy risk, and high-impact economic data highlights EURUSD and AUDJPY next week Interested in learning more about forex market volatility? Check out this article on theMost Volatile Currency Pairs Currency volatility is expected to be relatively muted next week according to implied volatility measures derived from 1-week forex option contracts. In fact,DXYUS Dollar Index 1-week implied volatility of 5.32 percent is the fourth lowest reading on a Friday all year. This is quite surprising considering the latest flareup in risk trends withBrexit talksstalling, the reignition of the US Chinatrade war , and intensifying speculation surrounding globalmonetary policy.
DXY US DOLLAR INDEX 1-WEEK IMPLIED VOLATILITY 
USDcurrency volatility appears to be trending higher, however, and forex price action has potential to receive a jolt from the Fed minutes due Wednesday at 18:00 GMT which will detail the April 30 – May 1FOMC meeting.Market participants will likely parse the text for additional insight on the US central bank's relatively hawkish or dovish leaning which will likely be reflected by overnight indexed swaps pricing.
The futures market is currently putting a 47.3 percent probability on the Fed cutting its policy interest rate by its September meeting, which is up from 31.7 percent last Friday.
CURRENCY VOLATILITY & TRADING RANGES (OPTIONS IMPLIED) 
Although, prior to theFOMCminutes release, it will be important to keep tabs onECB President Mario Draghiwho give a speech in Frankfurt at 7:00 GMT Wednesday on Eurozone economic developments and monetary policy. As such,EUR/USDwill be particularly interesting to watch next week.
EUR/USD PRICE CHART & TRADER SENTIMENT
According to IG client positioning data, 55.1 percent of EUR/USD traders are net-long with the ratio of longs to shorts at 1.23 to 1 headed into the weekend. In addition, the number of traders net long is 15.2 percent higher compared to last Friday.
As risk trends appear to be resurfacing,AUD/JPYwill be another currency pair worth watching next. With the recent shift lower inAUD/JPY price action , relatively risky currencies have generally been underperforming theirsafe-havencounterparts.
This has led to the unwinding of thecarry tradewhich has put additional downward pressure on spot AUD/JPY. Escalating risks stemming from the US China trade war threatens more downside in the AUD/JPY as market uncertainty – and volatility – looks to keepJapanese Yen bullsin charge of price action.
Furthermore, the risk that apossible RBA rate cutcould be hinted at by Governor Lowe who is set to speak in Brisbane on Tuesday at 2:15 GMT also threatens AUD/JPY next week. Also, the OECD is expected to publish its updatedGlobal Economic Outlookreport later on Tuesday at 9:00 GMT which has the potential to weigh heavily on the market's overall appetite for risk.
AUD/JPY PRICE CHART & TRADER SENTIMENT
AUD/JPY client positioning data from IG indicates that a staggering 80.2 percent of traders remain net-long resulting in a long-to-short ratio of 4.05 to 1. Moreover, the number of traders net-long is 26.6 percent higher compared to last week.
Taking a contrarian view on this trader sentiment data, spot AUD/JPY may continue to fall. That being said, with 1-week implied volatility of 9.68 percent, AUD/JPY traders might expect spot prices to gyrate between 74.755 and 76.469 over the next 5 trading days with a 68 percent statistical probability.
- Written byRich Dvorak , Junior Analyst for DailyFX
- Follow@RichDvorakFXon Twitter
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