Will volatility in currency markets ever come back?

The price fluctuation in the major currency pairs seems to be non-existent which makes the life of trend followers extremely difficult. The bandwidth keeps on holding and holding ….. until it suddenly breaks. Geopolitical topics, Brexit, trade wars and low interest rate environment seem to have only very short-term and limited impacts and are obviously not triggering any significant moves.
In times like that and specifically in low interest rate environments, investors like to take positions where they can earn a carry. Since all the Majors are in a low interest phase that seems to be a difficult pick as the risk premium for a carry is very small. USD was one of the major beneficiaries in that sense and even more so as the FED seemed to be on a hiking path ….. since yesterday. Investors bought a lot of USD debt, the economy was booming and Europe did not seem to be a promising investment environment. Well, being active in the currency markets for such a long time you tend to think you have seen it all but to be honest such low volatility for such a long time is unusual. Nevertheless, we did have those periods in the past and if you take a look at the very long charts, you see interesting developments and levels which make us feel confident that much bigger moves in currency markets will happen in the not too distant future. Since the fundamentals do not tell us anything at the moment, the charts clearly do. And it is not the algos running the show, it will be the low risk premium carry trades and the short positions in volatility.

The markets are definitely more complex and sophisticated but smart money is moving in regions and the respective currencies where opportunities come up. Whatever will trigger the first waves is pure speculation but we are fairly optimistic we will see some decent trends going forward.