Business-Insider

by John Jagerson

Following a strong correction yesterday, after the FOMC release, the USD has begun to weaken against most of the majors and particularly against the commodity currencies. The USD's slide is only exceeded by the JPY, which has made up all of last session's losses on the USD/JPY.

The bias for risk has shifted overnight as investors begin anticipating further action from the US Fed in the short term to resolve or control the issues in the credit market. Amongst many things, that may mean a mid-period cut to the discount rate and/or changes to borrowing conditions from the Fed, which should continue improving the credit market situation.

Just based on volatility, I am still anticipating a concentration of risk in the commodity currencies and a potential short squeeze on the JPY but as a carry trader, this is nice market action. Because trader expectations are driving the market currently, we should be very conscious of newly released news and hedges or appropriate stops should continue to be in play.

If you are interested in a diversified version of the carry trade strategy, click here to see our learning group on the subject: http://www.pfxglobal.com/index.php?o...stcat&catid=42

__________________