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.

Prices have entered previously established major support zone while recently completing multiple bullish patterns near 1.583...

Room Down to Critical Support, Potential Buy at 1.1876 on multiple bullish pattern completion...

A quick dip to 79.5-78.5 may be the spark needed to ignite a 3-month bull trend continuation...

Adjusted stop-loss and final profit target as this morning's USD/CAD buy at 1.2228 was triggered and has now reached our first profit targets of 70pips...

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.

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....

Potential selling opportunity should prices rally over the next 12-24hrs

1.262 proves to be key support on the heels of bullish pattern completion...

USD/CAD hit an 11 week high following the Bank of Canada's decision to cut interest rates by 50bp to a record low of 0.5 percent.

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 spotlight is on the US economy this morning but Canada also released their labor market numbers and unfortunately, job losses have been staggering. In the month of January, Canadian corporations cut 126k jobs, which is the equivalent of a million jobs in the US. The third consecutive month of job losses drove the unemployment rate to 7.2 percent, the highest since November 2004.

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 Bank of Canada cut interest rates to 1.00 percent, the lowest level ever for the 75 year old central bank and signaled that they could bring interest rates down to US levels. The historic move was motivated by the sharp downturn in the US economy and the continual slide in oil prices. Not only are Canadians making less, but they are seeing their household wealth plummet as well. The Canadian economy is not expected to grow in 2009, which is why more rate cuts are needed. The BoC is far from done and could realistically match US rates. Inflation is not a problem since they consumer prices are expected to be negative for the next 2 quarters

The US trade deficit narrowed materially in the month of November to the smallest since June 2003. Although the narrower trade deficit is normally something to cheer about, the details of the report indicate that the only reasons why trade improved was because of the fall in oil prices and slower domestic demand.

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.