News driven markets are tricky to trade and when sentiment changes, it gets really wild. The Aussie was a good example the last three trading days. Amid the recent commodity run the Aussie was heavily bid against the Dollar and traded well above its 200 dma on Friday. Because it is a commodity currency, plausible, right? The actually typical risk off movement only started after a spike high early Monday morning. At time of writing AUDUSD is trading nearly 200 lower. It's probably better to stay away from the market for now, but who can?
The Euro was heavily offered last week and finally broke through the 1.10 treshold against the Dollar on Friday. Yesterdays low was 1.0806 and there is currently no recovery in sight. Of course, the currency pair is oversold on the daily chart now but risk sentiment keeps the pair depressed. The prospect of a high US CPI print tomorrow afternoon (european) and a Ms. Lagarde, who doesn't want to change anything about interest rates for the time being does not help either.
In this “Russia-Ukraine” environment, implied Vols naturally remain supported and in particular the 2 weeks tenor is a fair bit higher compared to the last Vol update. This tenor also covers the next FED meeting on March 16th. Longer terms (9m, 1y) are nearly unchanged. For protagonists with real FX business this might be an opportunity to hedge their exposure still relatively cheap. But for active trading purposes the short-term Vols are quite expensive and you probably have to delta hedge a lot around it to make a decent profit.
(source: cme group, own representation)
Expectations for the FED meeting are high and a lot of bad news are priced in for the Euro (Ukraine, sluggish ECB, fear of stagflation). But unfortunately you don't know if everything is already on the table. The former 1.10 support will work as a resistance for now but one piece of good news from Ukraine is enough to rush traders into Euro again, at least in the short term.
Good luck,
Sebbo