The dollar has finished another choppy week of consolidation, closing roughly unchanged vs. the Euro and about 1 yen higher against the JPY. Carry trades continue to be the main source of reliable trade opportunities, with JPY crosses persistently testing important psychological levels, such as 164.00 in EUR/JPY and 240.00 in GBP/JPY. US Treasury yields jumped about 10 bps higher as the bond market continued to cover bets on a near-term US rate cut. The data out of the US this week was the proverbial glass half full/empty, allowing traders to draw from it what they wanted. Overall, the market appears to have abandoned its extreme pessimism over the US economic outlook, but in my opinion, just at the moment when the US economy is displaying signs of a soft patch directly ahead.   Full text »

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