FX Action

We are witnessing unusual trading in the foreign exchange market since the US markets have opened. Volatility is high.  This looks like the work of speculators unwinding their dollar carry trade. Speculators are cutting their losses on their dollar short position by selling yen and euro against the dollar.  Now the important question is this: are they mostly done or just getting started?  Remember, the dollar carry trade was a very crowded trade.

The market is still positive despite the stronger dollar.  This is a bullish sign.  The market is stronger than I thought.  I will stay flat over the weekend.