An age-old question among traders is, what leads a market — technicals or fundamentals?

There’s no easy answer, unless more specifics emerge. If the market in question is a physical commodity, such as oil or coffee, then fundamentals have the upper hand. In the case of foreign exchange, technicals tend to lead the fundamentals — but not always.

A revealing case study in this regard is the first three quarters of 2005. During this period, the dollar staged a powerful uptrend, but following it was not for the weak of heart.