Volumes suggest traders betting currencies turn - just be sure it's true

Volumes in the euro especially, and somewhat in the yen, suggest that currency traders are looking for a turn to occur. Carry trades can occur using whichever currency they think will weaken and provide lower borrowing rates. But that seems a good question right now - of course, it's all relative, including to the calculation reward for investing in the "riskier asset". Let's start with the US dollar index. Friday, it finally tagged the 80.80 level as I'd stated it was likely to need to do. That represents the ABC zigzag, C=A symmetry target. So there's a possibility it's "done" and readying to turn. The euro chart below (FXE) says the same thing - it slightly exceeded its own symmetry target but probably okay on that score as it counterbalanced the dollar index reaching its own. And look at the FXE volume when that happened on Friday!

The huge volume suggests many traders covered shorts and/or capitulated - probably both. With the positive divergence on the FXE chart, it's very reasonable to think the euro/dollar recent trends are about to change. What about the yen (FXY)? Its volumes ticked up modestly as it tested close to its 200 dma. Given it could be a higher low (as the dollar/yen pair tested close to the 92 revised target of Goldman Sachs), this can be seen as an orderly though deep pullback from a leading diagonal that still propels the yen (FXY) to new highs.

Slam-dunk? Not necessarily. Be certain of two things (at least). One, the the US dollar index doesn't want to go to the 50% retracement at 81.90-ish (virtually 82). Also, that all this really DOES turn. This is done by either seeing a reversal pattern and trading the trigger out of it. Or if you're a nimble speculator with good margin, stepping in at a move over Friday's high with protective stop just under Friday's low (reverse for selling the dollar). The alternatives include that the euro and dollar change from being zigzag pullbacks to further trending - more dollar up, more euro down. This may be less likely, than just having the trend change turn require more time and turbulence.