Fundamentals Crippling The FX Market: What Next For USD?

Something holds back the currency market, and it all seems to belong to fundamental factors. With the EU Economic Summit ahead and no-Brexit deal in sight, the Euro pairs may experience some volatility for the rest of the week.

But again, the ranges held so well lately that it is difficult to forecast a breakout.

The EUR/USD is the perfect example. For most of 2018, it traded in tight ranges. It began the year with a move from the 1.20 to the 1.24 area, where it spent no less than three months in a small range.

It was rejected, and fell the 1.15, only to consolidate around the level for the past four months. And, continues to do that, as we enter the fifth trading month with the price sitting close to the 1.16 mark.

A saying among Forex traders goes like this: if the EUR/USD doesn’t move, the entire FX market won’t move. A look at the other currency pairs comes to confirm it.

The USDJPY pair, while trading with a bullish tone, fails to break higher. It sits around 111-112, with the end of the year flows in sight.

The same is valid for the USD/CAD pair. It flirts with the 1.30 level, just like the USD/CHF does with the parity one.

What is needed for the FX market to start moving? Why there is no fundamental factor to cause a breakout?

So far the focus has been on Trump’s trade wars. First with China, then with Mexico and Canada, they brought volatility, but not a breakout.

The Saudi Arabia journalist investigation caused some downside on the US stock market. Indeed, it triggered a move lower on the USD/JPY pair, but not that much to call it a bearish breakout.

The only thing that remains on the table is Brexit[mv1] . Since the 2016 vote, the GBP/USD and EUR/USD pairs went nowhere. Besides the initial reaction, the market seems to wait for the outcome, whatever it may be As such, it may come down as 2018 to be a consolidation year for all major currencies. Unless the USD finds a reason to break ranges (despite Fed running a double tightening cycle), the focus remains on fundamental factors possible to move the markets.

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