The U.S. Dollar is the world’s reserve currency and the key driver of activity in the Forex market. The longest and strongest trends in Forex are driven by the U.S. Dollar. Trading the USD against other global currencies is also the cheapest way to trade Forex as spreads and commissions for these Forex pairs tend to be cheaper than for Forex crosses that do not involve the USD on one side.

In recent years, the best trends have been driven by the USD, especially during 2014 when the USD rose spectacularly against currencies such as the CAD and the JPY. There was a general perception in the Forex market that these were intelligent position trades as technical analysis matched fundamentals and central bank policies in the cases of comparing the U.S. to countries such as Canada and Japan.

Apart from a quick flurry of strong U.S. dollar movement against the Euro and the Canadian dollar during the early part of 2015, the U.S. dollar in particular and the Forex market in general has become less active. One major reason for this is that the outlook for the U.S. dollar has entered a kind of nowhere zone.

The USD Flattens Out

During 2014, the fundamental and technical outlooks for the USD not only looked strong, it was also widely felt that it was the strongest of all the major currencies. Not only was it making new highs just about everywhere, its central bank (the Federal Reserve) was beginning to talk about getting ready to raise its interest rate for the first time in several years. Moreover, the key economic data releases coming out of the U.S. such as Retail Spending and Non-Farm Payrolls were getting higher and higher and exceeding market expectations.

This picture has changed over recent months as the Federal Reserve continued to hedge its bets about raising the interest rate. It has recently signaled it MAY raise rates in December, but the market does not see this as especially probable. Perhaps more ominously, a feeling has grown that the U.S. economy continues to experience a “Potemkin recovery”, i.e. one that is not a true, strong economic recovery. Perhaps the fact that commentators are still talking about a “recovery” 7 years after the crisis tells you all you need to know! Finally, recent key economic data has been mostly disappointing.