The lack of any meaningful U.S. economic data along with fear that the swine flu has the risk of turning into a global health crisis has caused investors to flock into the safety of the U.S. dollar. We have always said that when it comes to currencies, investors and traders always sell first and ask questions later.

The Aussie is showing signs of a potential dip as prices come off previously established 78.6% resistance near 0.7240-50 (see 8hr chart). A bearish Gartley pattern is developing...

The EUR/AUD is currently retesting 61.8% support near 1.837 in what could be point C of an emerging butterfly pattern which is projected to complete near previously established resistance near 1.8583.

The foreign exchange market has been relatively quiet today with most major currency pairs fluctuating within a tight trading range. Although the U.S. dollar continued to lose value against the Japanese Yen, it remained virtually unchanged against the Euro, British pound, Australian and Canadian dollars.

The EUR/AUD has been under strong selling pressure since mid-March dropping approx 1,400 pips recently testing ~1.85 support.

It is a relatively quiet day in the currency market and therefore we take this opportunity to talk about one of our favorite topics, Seasonality.

The next 24-48 hours will be critical and may set the stage for what could be the swing trade of the month....

TRADE IN PROGRESS...on multiple bullish pattern convergence establishing 2.11 a critical support

It has been a rough day in the financial markets with the Dow Jones Industrial Average and S&P 500 falling to the lowest level in 12 years.

The Australian Dollar has been trading in a very tight range over the past few weeks and is prime for a breakout.

The AUD/USD and NZD/USD may have topped out in the face of previously established major resistance...

As expected the RBA lowered rates by 100bp taking the yield to 3.25%. The easing took the cash rate to its lowest level since the RBA adopted it as a policy target in 1990. The last time overnight money market rates were this low was in the early 1960s. Although the RBA cited deteriorating global economic conditions as the reason for its move, it made no reference to possible further cuts in March.

There are 3 interest rate decisions on the calendar this week from Australia, the United Kingdom and the Eurozone. Only 2 out of the 3 countries are expected to cut interest rates but all 3 rate decisions and the corresponding comments from central bank officials should trigger some volatility in the currency market. Although the amount of easing is important, what will receive more attention are the comments on how much further these central banks could cut interest rates. The upcoming rate cut is not expected to be the last for the Reserve Bank of Australia or the Bank of England and the expectation of further rate cuts could prevent a major recovery in the Australian dollar and British pound.

Although the Federal Reserve did not change interest rates this afternoon, the FOMC announcement led to a significant amount of volatility in the currency market. In our FOMC Instant Insight, we talked about how the dollar rallied because the Fed said that they “may” and not “will” start buying US Treasuries. The market was looking for something more radical such as inflation targeting or a bold announcement that they will immediately start buying long term Treasuries in size, which would have been dollar bearish. In the grand scheme of things, the Federal Reserve delivered nothing new today. So with that in mind, what should we expect now that the FOMC meeting is behind us?

It is not often that we can see the US dollar hit a 23 year high against one currency and a 13 year low against another on the very same day. However that was exactly what happened this morning when the greenback surged against the British pound and collapsed against the Japanese Yen. Volatility ripped through the foreign exchange market as central bank and other US officials comment on their economies and currencies. The milestones were not limited to the GBP/USD and USD/JPY as the NZD/USD and EUR/JPY also fell to a 6 year low intraday. However what was most impressive is the fact that none of the staggering losses were sustained.

The euro started off the new week the same way it ended the last one – by sliding against the dollar as focus in the currency shifted towards the ECB. The central banker in Frankfurt are facing escalating pressure to lower rates in light of the severe slowdown in economic activity in the Eurozone. In contrast , Friday’s US Non Farm payrolls, though horrid at -525K, were far better than the whisper number of -700K and as a result support for the greenback stiffened as the data refused to confirm the dollar bears worst expectations.

The US dollar is selling off aggressively ahead of Friday’s non-farm payrolls report on the fear that for the second month in a row, job losses may have topped 500k. The recent moves in the currency and equity markets suggest that everyone expects a very weak labor market report. Although the consensus forecast is -520k, the whisper number is closer to -650k to -700k. Sentiment is strongly skewed in one direction which can be dangerous considering the fact that some of the leading indicators for non-farm payrolls call for a rebound.