Even though non-farm payrolls fell short of expectations, the sell-off in the US dollar has been limited. Why was there such odd price action in the greenback? Two reasons.

The rally in the US dollar today suggests that the optimism about Fridays non-farm payrolls release could be stronger than most economists and derivative traders may anticipate.

It is non-farm payrolls week and as usual traders should be prepared for some decent volatility in the currency market.

Even though softer first quarter GDP growth drove the US dollar to a fresh record low against the euro, the greenback ended up staging a very impressive intraday reversal.

Could the US dollar set a near-term bottom this week? Quite possibly.

Over the past few trading days, we have seen a great deal of intraday volatility in the currency markets. The battle between top pickers and carry traders has been fierce with Asian and European traders opting for the former and US traders opting for the latter.

Strong data hasn’t helped the US dollar and today, weak data has actually hurt it.

Foreign exchange traders are so hungry for yield and carry that they completely shrugged off today’s batch of US data.

The demand for carry trades and yield is showing no signs of abating as traders remained focused on buying the currencies of countries that still plan on raising interest rates. This is why the US dollar has weakened across the board despite a sharp increase in import prices and a strong chain store sales report.

Currency strategist Kathy Lien tooks a look ahead at the second quarter for the EUR/USD currency pair.