Dollar Mixed Ahead of Employment Reports

The dollar traded mixed ahead of Friday's important employment reports. US employment is forecast to fall over 300K and a drop over 400K is not out of the question. The USD/JPY dropped, testing important support in the 92 area, as US equities declined. Sterling fell against the greenback and dropped to a record low versus the euro after the Bank of England cut its policy rate 100 basis points to 2.00%, the lowest rate since 1951. The European Central Bank and Sweden's Riksbank all cut benchmark interest rates in an attempt to stem the global economic slump. The Australian dollar fell as commodities and equities tumbled. The Canadian dollar declined the most in a fortnight as crude-oil prices fell below $44 and Prime Minister Stephen Harper won approval to suspend the parliament and delayed an opposition vote of confidence.

The EUR/USD advanced, reversing an earlier decline, after the ECB lowered its refinancing rate 75 basis points to 2.50%. ECB President Jean-Claude Trichet said at the press conference that "global and euro-area demand are likely to be dampened for a protracted period of time" but did not promise further rate cuts. The pair has been stuck in a holding pattern between the 1.31-area resistance and the 1.24-area support since late-October. A breakout of this trading channel will most likely be followed by a larger move in the same direction.