Forex options and futures markets paint a decidedly mixed picture for the US Dollar, as traders are increasingly unsure of short-term direction. We had been calling for a major US Dollar turnaround for quite some time now, and the EUR/USD’s sharp initial reversal from $1.50 gave us reason to believe that the Greenback could continue higher. Yet the opposite has been true, and it has become increasingly difficult to establish a firm short-term trading bias. Suffice it to say, it will be critical to watch price action and sentiment indicators in the week ahead.
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Volatility expectations have dropped considerably from recent peaks, but this has not resulted in a slowdown in intraday US Dollar price volatility. Indeed, markets remain extraordinarily choppy on a day-to-day basis, but major currencies remain confined to choppy ranges. Given exceedingly low 1-week volatility expectations, we suspect that this may continue to be the case through near-term trading.