Oil threatening Dollar Gains

U.S. Dollar Trading (USD) was on the backfoot early in the day as commodities found strength and recent dollar gains were pared back. US Durable Good Orders were significantly higher than expected in July coming at 1.3% (.1% expected) putting the Dollar bulls back in control. Oil surged higher a possible superstorm developed in the Gulf of Mexico threatening offshore Oil platforms. In the U.S. share markets, the NASDAQ was up 20 points (0.87%) and the Dow Jones was up 89 points (0.79%). Crude Oil closed up $1.88 ending the New York session at $118.15 per barrel. Looking ahead, big data day ahead with Core PCE Q2 expected at 2.1% along with GDP Q2 seen at 2.7% annualized. Weekly Jobless Claims are expected to ease slightly to 428K.

The Euro (EUR) was able to make substantial gains after bouncing off the multi month lows of Tuesday. Hawkish ECB comments from multiple members tempered speculation of interest rate cuts before the end of the year, which combined with surging Oil supported the single currency. German CPI figures showed a drop of -0.3% in August. Overall the EUR/USD traded with a low of 1.4634 and a high of 1.4777 before closing the day at 1.4725 in the New York session.  Looking ahead, German Unemployment Rate seen unchanged at 7.8% after an Unemployment change forecast at -10K in August.

The Japanese Yen (JPY) stock weakness and early dollar weakness allow the Yen to strengthen falling off the 109 handle before stocks rebounded on strong US data. Crosses were heavy lead by the EUR/JPY which tested the 160 support. Overall the USDJPY traded with a low of 108.70 and a high of 108.89 before closing the day around 109.50 in the New York session.

The Sterling (GBP) suffered the most of the majors as a key resistance on the EUR/GBP was broken at .8000. Cable was able to recover in line with the Euro but fell heavily after the US Durable Goods Orders to hit New Year lows below 1.8300. Overall the GDP/USD traded with a low of 1.8285 and a high of 1.8489 before closing the day at 1.8360 in the New York session. Looking ahead, CBI Trends Orders August forecast at -30 vs. -36 in July.

The Australian Dollar (AUD) recovered from lows as Oil and other Commodities strengthened and USD was sold. US data took the bid tone off the Aussie sending the pair back to the .85 handle. AUD/JPY bounced as equities recovered. Overall the AUD/USD traded with a low of 0.8530 and a high of 0.8636 before closing the US session at 0.8585. Looking ahead, Q2 CAPEX forecast to recover to 2.0% Q/Q after falling -2.5% Q1.

Gold (XAU) benefited as an inflation hedge as Oil continued to head higher and US Treasury yields fell. Overall trading with a low of USD$822 and high of USD$835 before ending the New York session at USD$827 an ounce.

TECHNICAL COMMENTARY

Euro – 1.4750

Initial support at 1.4634 (Aug 27 low) followed by 1.4571 (Feb 26 reaction low). Initial resistance is now located 1.4777 (Aug 27 high) at followed by 1.4808 (Aug 25 high).

Yen – 109.45

Initial support is located at 108.70 (Aug 27 low) followed by 108.3 (Aug 21 low). Initial resistance is now at 109.86 (Aug 27 high) followed by 110.29 (Aug 25 high).

Pound – 1.8340

Initial support at 1.8331 (Aug 26 low) followed by 1.8177 (July 17, 2006). Initial resistance is now at 1.8489 (Aug 27 high) followed by 1.8531 (Aug 26 high).

Australian Dollar – 0.8600

Initial support at 0.8532 (Aug 27 low) followed by 0.8495 (Aug 26 low). Initial resistance is now at 0.8647 (Aug 26 High) followed by 0.8693 (Aug 25 high).

Gold – 829

Initial support at 807.40 (Aug 22 low) followed by 801 (Aug 20 low). Initial resistance is now at 838.60 (Aug 21 high) followed by 846 (Former May 2 support).