Extreme volatility in Forex

Good morning, it is somewhat difficult to try to explain why we are seeing this volatility in Forex. Mainly because of options expirations, year end flows and excess of speculation would be the correct answers, not in that order and not at the same time, but those 3 things are the responsible for that. Last Friday the EUR/USD made an impressive 60-70 pips rally, and it was not after 30 minutes after the release of the Housing Market that it started, so I think that it was not fundamentally driven and not also technical, it was speculative driven that move, like nearly all the moves nowadays. That makes trading very difficult if you don’t have a plan and if you are not well prepared to enter this kind of markets, one of the most important things you need to be capable of is to understand the markets language, every candle, spike etc is the market trying to tell us something, your ability to distinguish that is what makes the difference between an unsuccessful trader from a successful one.

The yen slipped to a record low against the euro and dropped versus the dollar today, after a weekend Group of 20 finance chiefs meeting yielded few comments on the Japanese currency's recent weakness. The euro was further boosted after European Central Bank President Jean-Claude Trichet said the ECB had to be strongly vigilant on inflation risks. The ECB is widely seen raising interest rates to 3.5 percent next month. ECB governing council member Nicholas Garganas was quoted as saying on Monday that monetary policy remained expansionary despite rate increases in the past year. In contrast, Japan's overnight call rate stands at just 0.25 percent. The yield gap has kept the yen under pressure through carry trades -- where investors borrow cheaply in the Japanese currency to invest in higher yielding assets elsewhere.

The short USD/CHF reached our limit and we booked a 90 pips profit, and we are still open in EUR/USD and USD/JPY