By DailyFX – An extraordinarily quiet night in FX markets as the EUR/USD remains moribund with the pair locked in a 20 point range. Economic… … data showed mixed results providing no
fuel to either bulls or bears.

The main news of the night was the Euro-zone Current
Account which contracted to -3.3 Billion euros from -5.3 Billion the period prior.
However portfolio inflows decreased from €33 Billion in December to only €19 Billion
in January dampening the positive news of the headline number. Market participants
ignored the data for the most part and the pair traded listlessly throughout the
European session with attention now turning to US Existing Home Sales report due
15:00 GMT later today.

The market expects a small drop of 60K units in the US housing sales which should be
consistent with a slightly softer results in MBA mortgage applications. However a
much greater than expected decline could send the currency market for a loop as
housing has been the cornerstone of US economic growth since 2003. If the Fed's
tightening campaign has already resulted in material slowdown of housing demand then
market expectations of US interest rate policy may change yet again as traders
begin to speculate that 4.75% may well be the end of Fed rate hikes. The indecisive
price action is simply emblematic of the uncertain fundamental picture and currency
markets are unlikely to find direction until eco data provides more meaningful
information.

Meanwhile in Asia the USD/JPY executed the familiar one-two step of bullish economic
news, followed by bearish rhetoric from monetary officials. Japanese Merchandise
Trade Balance posted a slightly smaller surplus than expected but both imports and
exports recorded the largest gains in 9 years indicating that Japanese economy is
firing on all cylinders. Nevertheless, yen bulls were stymied after BOJ member
Nakahara noted that deflation still persisted and he saw no need to abandon the ZIRP
standard anytime soon. In short it appears as though yen bulls will be thwarted in
any attempt to take the pair lower until monetary policy begins to echo Japan's
decidedly firmer economic results. For the time being the 115.00 level in the
USD/JPY is likely to hold.

By DailyFX