So how can we play this USD move?

The fact that the US dollar is under pressure is indisputable. On Aug 15 I moved a large portion of our family liquidity out of the US dollar, into the Euro. Since then the euro has moved from 1.346 to the dollar to almost over 1.42 today, and I expect this trend to continue.

In my opinion, the US Federal Reserve isn't going to have much choice with interest rates in the near future. Rates are going to have to come down to protect the US economy from the fallout of this sub-prime lending debacle. But at the same time the European Central Bank is facing an inflation problem here, and rates will have to be raised. It's only a matter of time.

Long term debt investors looking to increase returns will be buying Euros in order to invest in the European debt markets, and the volumes involved are more than enough to affect the Euro:USD exchange rate. As I write this, clever European exporters are hedging their USD accounts receivable and future sales against this likelihood. One way to do this is with CurrencyShare funds such as FXE. There is a similar fund for the Canadian dollar too, FXC.

As a retail trader who is not adverse to risk, it is my opinion that the options chains on these funds is the best risk/reward trade to be made today. As an example the FXE Dec 145 call are quoted at $1.05/$1.50. This, at a time when FXE itself has moved from $134 to $142 in just 5 weeks. There are 11 weeks ahead of us, before the December options expiry.

If you are concerned about the volume of trading in FXE options, you might be better trading the FXC options chain. Canada is Americas largest trading partner, so hedging and trading of the currencies far exceeds that of any other currencies. This means that spreads are narrower, liquidity is better, and trading should easier if the market goes against you.

Disclaimer: I have no positions in these products, at this time. But that could change today.