The dollar held above key support levels against the euro and yen, but had little momentum of its own to break out of familiar ranges. Wednesday' relief rally on Wall Street helped pull global equity markets higher but there is concern that stocks may fall again, weighing most on the yen due to its dependence on a export led recovery. But markets will also watch for US durable goods orders for August, which are expected to fall 3.4% after rising 9.2% in July. The decline is mostly seen as a payback to the previous month's excess, but given the recent spate of negative economic news, a worse than expected figure could easily pull US equities lower and weigh on the dollar.
Weekly jobless claims are also seen at 420k from 424k last week. Claims have remained above the key 400k level for the past three weeks now indicating new weakness in the labor markets and by connection, consumer spending stands at risk. Moreover, in a signal that the U.S. housing market may be softening, existing home sales fell in August by 1.7% from July. The resilient strength in the housing sector has been instrumental in propping up consumer spending and offsetting equity losses, though some have argued that the boom could turn into a bubble. August new home sales also fell 2.2% earlier this month. While a minor slowdown in the sector could mean activity is adjusting to more sustainable levels, a more pronounced slowdown could undermine the already fragile economic recovery.
But the dollar has remained more or less stable against the euro given that the economic data from the Eurozone is as, if not more, troublesome. The latest evidence was Germany's September IFO business confidence index which fell to 88.2 from 88.8. Markets have come to anticipate Germany's difficult situation, so dealers will tune to France's business climate indicators today which are expected to show a sharp drop to 95.7 in September from 98.0 in the headline figure and a fall to -20.9 in the business outlook from -16.0.//www.forexnews.com