The EUR/USD continued to oscillate between the 1.2070-1.2150 zone following yesterday's strong TICS release. TICS reported a surplus of $89.1 Billion against a Trade deficit of -$65 Billion, but as we suspected that data was only mildly bullish for the dollar with the market interpreting the results as simply buying another month of peace for dollar longs.  Presently, the currency market is in search of direction and like the characters on "Lost" no one is certain where the next danger point lurks.

With the eco calendar offering only a smattering of second tier data from the Euro-zone trading appears to have been driven by the residue of yesterday's positive TICS results. Recently however, the currency market has been extremely sensitive to US housing data amidst worries that this vital sector of the US economy may be rapidly decelerating. Therefore, today's Housing Starts and Building Permits may well have an impact. Nevertheless, the tug of war between dollar bulls and bears appears destined to continue for the near term. The pair has found support at the 1.2000 level and the fact that the dollar was unable to rally much yesterday despite good fundamental data must infuse euro bulls with some confidence. On the other hand the TICS results have taken the focus off the US Balance Sheet problems  for yet another month and should the Fed raise rates as expected by another 25 basis points at the end of this month and follow its actions with hawkish rhetoric the EUR/USD could easily slip below 1.2000 once again. Overall this market environment reminds us greatly of the summer of 2004 when range trading ruled for months. For those nimble enough to capture that "horizontal trend" the rewards were large indeed.

Boris Schlossberg is a Senior Currency Strategist at FXCM.