With the never-ending Brexit saga garnering all the headlines, volatility in EUR/USD has dried up. The 3-month implied volatility reading for the world’s most-traded currency pair dropped below 5.60% today, its lowest reading in five years. In addition to the typical lethargic pre-weekend trade, over €4B in expiring options were struck between 1.1285 and 1.1325, creating a big incentive for certain players to keep the single currency in a limited range against the greenback today.

Despite the subdued volatility, EUR/USD is quietly working on its fifth rally in the six days since last week’s ECB meeting. The move was catalyzed by a false breakdown below previous support at 1.1215, trapping shorts in a losing position, and the ensuing rally has been relatively sharp. That said, EUR/USD is now approaching a key short-term hurdle at the top of its year-to-date bearish channel in the mid-1.1300s.

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Source: TradingView, FOREX.com

As the chart above shows, rates could still rally another 30-50 pips before reaching this resistance area. That said, previous drops from the top of the channel have averaged nearly 280 pips, setting up a potential sell opportunity for bearish readers. Bulls may want to tap the brakes until/unless we see a confirmed close above the bearish channel, accompanied by an equivalent breakout in the RSI indicator.

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