We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Bullish
Oil - US Crude
Bearish
Wall Street
Bearish
Gold
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
GBP/USD
Bullish
USD/JPY
Bullish
More View more
Real Time News
  • Fed Discount-Rate Meeting Minutes: - Directors reported noteworthy declines to economic activity, particularly in retail, tourism, and travel industries - Several directors expect jobless rate to increase further in coming months $DXY $SPX
  • Indices Update: As of 18:00, these are your best and worst performers based on the London trading schedule: Wall Street: 1.48% US 500: 0.58% FTSE 100: 0.16% Germany 30: -0.05% France 40: -0.07% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/qJvZxDmmST
  • Dow Jones Index strength continues in afternoon trading, as recovery hopes spur risk appetite $DJI https://t.co/4M6CoMdyGn
  • $USDCAD dives to lowest level since March 15 on USD weakness https://t.co/8abAuksdMo
  • #Equities: US futures on the front-foot with market participants returning from their elongated break, which in turn sees the S&P 500 pierce the psychological 3000. Get your #equities market update from @JMcQueenFX here: https://t.co/7O447VkToZ https://t.co/TyXEaPVnbb
  • LIVE NOW: Join @JStanleyFX as he runs through price action set-ups for the FX and CFDs market. https://www.dailyfx.com/webinars/1338844901231735299
  • it's time for the webinar, starting right now https://www.dailyfx.com/webinars/1338844901231735299 https://t.co/gLQFjotDmG
  • Senate Majority Leader McConnell says drop in revenue for States a concern, but national debt is also concerning- BBG
  • LIVE IN 5 MINUTES: Join @JStanleyFX as he runs through price action set-ups for the FX and CFDs market. https://www.dailyfx.com/webinars/1338844901231735299
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Ripple are long at 96.52%, while traders in US 500 are at opposite extremes with 75.73%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/tkFbZhU9DE
An Historic Dollar Range That's on "Borrowed Time"

An Historic Dollar Range That's on "Borrowed Time"

2013-08-01 19:41:00
Todd Gordon, Technical Strategist
Share:

The US dollar index has now been range bound for the longest period in the last 28 years, and when that range is ultimately broken, it could signal a major shift toward heavy volatility and plentiful trade opportunities.

I had a conversation yesterday with a former boss and now good friend of mine who recently attended a meeting with some hedge fund giants. Included in that meeting was my personal favorite, Paul Tudor Jones.

My former boss said that one very interesting takeaway from the meeting was that many of the hedge fund giants agreed about the notion that today’s markets are very difficult compared to prior years.

Volatility, for short-term traders, is our best friend, afterall, and that got me thinking: How could the markets—specifically the currency markets—exhibit such low volatility during a debt crisis, which would be widely expected to produce more volatility?

The main reason is because major central banks have dropped interest rates in unison to rock-bottom levels, effectively creating very small interest rate differentials. At the same time, however, the central banks have been creating massive amounts of credit to purchase fixed-income assets in hopes of pinning rates at those artificially low levels. So far, the central banks have succeeded, and as a result, volatility has been severely suppressed.

However, the chart below suggests that volatility may not stay low for much longer.

Guest Commentary: Multi-Year Dollar Range Is on “Borrowed Time”

An_Historic_Dollar_Range_Thats_on_Borrowed_Time_body_GuestCommentary_TGordon_August1A.png, An Historic Dollar Range That's on "Borrowed Time"

The US Dollar Index chart above dates all the way back to 1985. And, in those 28 years, there have been two major consolidation, low-volatility periods.

The first one was from June 1989 until January 1997, which calculates out to be 91 monthly bars, 390 weeks, or 2700 trading days. The second major consolidation over the last 28 years is actually happening right now. It formed just prior to the housing collapse and credit crisis in November 2005. And, if history is any guide to future market behavior—and we all know it is—the ongoing consolidation is currently on borrowed time.

Considering 91 monthly bars, 390 weeks, or 2700 trading days projected out from November 2005, it gives us equality of the ranges in late-May 2013. The current consolidation is now three months longer than the biggest currency market consolidation in 28 years.

Now, I have no idea what the catalyst will be that ejects us out of the current range, but that catalyst is coming soon, and when it does, expect volatility, ranges, and trading conditions to be plentiful.

By Todd Gordon of TradingAnalysis.com

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES

News & Analysis at your fingertips.