Gold - the high conviction intraday mean reversion trade
With the FOMC out next week, it’s clear the Fed need to bring out the big guns – convince traders they can boost inflation expectations and bring down real yields (a weaker USD is helpful). So, there are upside risks for gold, but the triangle pattern can go either way and that needs to be respected when it goes.
In the ST, daily implied volatility in XAU sits at 15.09% and subsequently prices a daily straddle for an implied range of 1966 to 1922 (price has a 68.2% probability of being contained here). I would lean into these levels intra-session as a mean reversion trade, but that depends on PA into here, with the high conviction trade coming into the 10d strangle implied move of 1904 to 1988. This marries with the Bollinger bands, so we have a confluence of implied and realised vol at these levels - for traders looking for the high conviction fade, this is statistically important.
In the ST, daily implied volatility in XAU sits at 15.09% and subsequently prices a daily straddle for an implied range of 1966 to 1922 (price has a 68.2% probability of being contained here). I would lean into these levels intra-session as a mean reversion trade, but that depends on PA into here, with the high conviction trade coming into the 10d strangle implied move of 1904 to 1988. This marries with the Bollinger bands, so we have a confluence of implied and realised vol at these levels - for traders looking for the high conviction fade, this is statistically important.