If you said “nothing”, you’re basically on the money! The US dollar index (DXY) and my own equal weighted EMFX (emerging market currencies) index have been locked into a very tight trading range, with more than 1 false breakout showing up across those 4 key USD charts.
Implied volatility typically tracks closely with realized volatility – of which there is very little.
Historically this type of trading often precedes either a turning point, a large/violent move, or both.
The market psychology and macro realities that create this type of market is basically exactly what we see right now: significant division between bulls and bears, and competing/conflicting macro data and central banking outlook.
In other words, it represents a deadlock between bulls and bears.
At some point the deadlock gets resolved and bulls join bears or vice versa and hence you get a big turning point or sharp move. All that is needed is a catalyst and/or some clarity on the macro front.
In the near term there are multiple candidates in terms of data and central bank meetings, so strap yourself in… things could be about to get very interesting for the dollar (and hence basically every other market/asset in the world given the tendency for earthquakes in the dollar to send shockwaves across global markets).
Could be barking up the wrong bush here, but it looks like gold is proffering a shot across the bows in terms of what could be in stall for the US dollar. For what it’s worth, I have been bearish USD since the start of the year, and remain that way (until proven otherwise!).