Today saw investors selling the US Dollar, with strong gains by its major rivals - the Euro, Pound, and Yen. There are mounting fears of a global double-dip recession as recent data is showing the US recovery sputtering with the labor market remaining to be very loose and housing retrenching sharply following the expiration of the government's home-buyer tax credit.

Traders and investors are also likely pricing in a very weak Friday non-farm payroll report. Today also showed that the manufacturing sector in the US is beginning to cool as the ISM manufacturing index slowed to 56.2 from 59.7. Expectations had been for a reading near 58.9.

Adding fuel to the fire are the ongoing troubles with European banks as well as austerity measures that will be undertaken by European nations and the UK which will hurt growth in that region. But even more importantly, the developed world may have been counting on the developing world - and China - to lead the way forward. However, China, being concerned about an economy that is overheating and fueling not only inflation but a possible housing bubble has tried its best to put the brakes on its economy. The efforts seem to have paid off at least in the manufacturing sector, as data overnight showed.

The play during times of risk aversion and concerns about global growth had tended to favor the US Dollar as traders looked to find safety in the safe-haven of US Treasuries. But, with Treasury yields falling to lows not seen in a year or more, that investment does not look likely to pay off. Also, with the focus on the slowdown coming from the US, the Dollar is actually being sold on its fundamentals. This is a break with the trend we have been seeing, but something we had mentioned could happen when we had our Monday Cover-it-Live session.

While the prospects for growth in Europe, the UK, and Japan are also fairly weak, and even commodity currencies like the Australian Dollar can be affected by the slowdown in China, its hard to pick a clear winner in this environment.

What may happen is the Yen gains as investors unwind carry-trade positions. That is those investors that borrowed in the cheap Yen and invested in higher yielding assets abroad will not buy Yen in order to pay off those initial loans. Carry trade unwinding can be seen in currencies like the AUD/JPY this week, reminiscent of what we saw in the middle of May during the height of the European sovereign debt crisis. The USD/JPY has also been sliding, or moving in favor of the Yen, as US Treasuries yield less, squeezing the spread between US and Japanese bonds.

What to expect therefore in tomorrow's session as we do have the non-farm payroll report coming out. Expectations are for a -110K headline reading as temporary Census jobs are removed from the figures. The ADP employment report was much weaker than expected, and as it measures private sector employment, the outlook for the NFP to post strong growth in the private sector has diminished. Therefore, have traders and investors priced in a very poor report already in today's trading, or will the Dollar lose out even more? That is the key question.

The EUR/USD and GBP/USD pairs peaked above their recent highs, and a break of resistance at the 1.2470 level in the EUR/USD and the 1.4150 level in the GBP/USD pairs would open up further gains.

Another question to consider going forward is what will Japanese policy makers think about the Yen's recent gains? A strong Yen is bad for Japanese exports and talk of intervention from the BOJ would have a direct and immediate impact.