The U.S. Dollar is expected to open mixed this morning based on a slow overnight trade. The Dollar is losing ground to the Euro and Japanese Yen while showing strength versus the British Pound, Canadian Dollar and Swiss Franc.
The September Euro has been showing strength versus the Dollar recently because the pace of the European recovery is moving faster than traders. Overnight the German Business Confidence Index was reported stronger than expected. This is still another sign that an economic recovery is on the way.
The September Canadian Dollar is trading lower overnight. Weaker crude oil prices are contributing to this weakness. Late yesterday, Timothy Lane, deputy governor of the Bank of Canada remarked that the strength of the Canadian Dollar presented “important risk” to growth.
U.S. equity markets are called lower this morning. The last two days the indices have faded into the close. The rallies this week also appear to be labored. This could be an indication that prices are getting a little too expensive for traders.
Yesterday the markets surged on better than expected U.S. housing numbers and an increase in consumer confidence, but the bulls couldn’t hold on to the early session gains. Today traders will be watching the U.S. durable goods and new home sales reports for clues that the economy is showing additional signs of recovery. Both reports are expected to be higher.
The chart pattern suggests that a short-term top may be forming. The September E-mini S&P 500 indicates that a correction to 1006.75 is possible. Traders have been buying dips near the 1022.00 area. If this pattern fails on the next break then look for the selling pressure to begin.
U.S. Treasury markets are trading higher overnight. Yesterday’s Treasury auction went well as foreign central banks increased demand for U.S. debt. The Treasury is holding another auction today. Expectations are for this one to be well received also. A break in the equity markets could add additional support to the September Treasury Notes and September Treasury Bonds.
Look for pressure on December Gold and Silver if the Dollar picks up strength throughout the trading session. If China curbs liquidity then demand for copper may drop. The September Copper chart suggests a possible double-top formation.
Crude Oil traders have had a hard time following through to the upside following last week’s surge. Traders will be focusing on today’s inventory report to see if a trend is developing. Last week’s report showed an unexpected drawdown of about 8.1 million barrels. Traders will be watching to see if the current economic recovery is beginning to increase demand for crude oil.
