When we think of summer, we usually think of things like hot, lazy days, long weekends, and spending time relaxing with family and friends. This is also why volume and volatility tend to decrease during the summer — even the members of the European Central Bank take the entire month of August off to enjoy their holidays.

However, no one was resting easy during the summer of 2007. The third quarter will go down as one of the most volatile in years. The losses in the financial markets drew comparison to the 1997 recession and the crisis induced by the blowup of Long Term Capital Management and the Russian debt default in October 1998.

Let’s look at the forex market’s fourth-quarter prospects in light of what has recently unfolded in the global financial markets, focusing on the much-discussed carry trade and the U.S. dollar.