The EUR USD felt downside pressure most of the day session as a weaker than expected Ifo Institute Report showed German business confidence declined this month to 94.8.  This was the lowest level in three years and, coupled with the recent contraction of the European economy during the second quarter, sent signals to traders that the ECB should be considering an interest rate cut to stimulate growth.  European financial market traders are supporting this notion by placing bets in the direction of a rate cut.

Losses would have been worse, but a stronger crude oil market helped support the Euro late in the session.  Later in the day the Fed released its minutes from the August 5 FOMC meeting.  This report showed that the Fed is willing to raise rates but still concerned about the weak employment situation and the financial instability of the U.S. credit markets.  Because of these conditions the Fed cannot set any date for a rate hike.  
 
Wednesday is Durable Goods day.  Traders expect this report to show a decrease in consumer spending on durable goods as higher unemployment and concerns about job security may be encouraging consumers to hold back on major purchases.  This will be another sign that the U.S. economy has not bottomed yet.
 
The weakening Euro Zone economy and the possibility of an ECB rate cut are expected to continue to put downside pressure on the EUR USD even if the U.S. economy continues to seek a bottom.  Higher crude oil prices could make the difference as to whether the move accelerates down.  If tensions continue to rise between Russia and Georgia or if the tropical storm heads towards U.S. refineries, crude can rally thereby setting up a short-covering rally in the Euro.
 
The USD JPY had an inside day on Tuesday but closed higher, reflecting the slight gain in U.S. stock markets.  Traders are not expected to rush back into the higher yielding U.S. stock markets until the U.S. credit markets loosen up.  At this time, tight credit is causing financial instability and fears that the banking crisis will worsen.  This is keeping Japanese and carry-trade investors on the sidelines.  Traders just need some sign that the U.S. is a safe environment for investment and the overseas money will return.  Unfortunately because of the upcoming 3-day week-end, traders are unlikely to commit in a big way until possibly next week.  Technically the trend is down with 109.94 controlling the short term direction.   
 
The GBP USD fell to a new low for the year as British banks granted 65% less mortgages from a year ago.   Mortgage approvals at a ten-year low are reflecting the tightness in the U.K. credit market and the worsening housing market.  At this time there does not seem to be any reason to buy the Pound even though prices are at  2- year lows.  Technical traders are trying to build a case for a rally because of oversold indicators, but the selling pressure has been too great to support a rally.  The charts indicate the trend will be down until 1.8793 is crossed. This is unlikely, however, until this market stops going down and builds a support base.  The Bank of England remains quiet as it is sticking to its mandate that the economy should be allowed to work its way out of the current economic weakness. Financial market traders are betting, however, that the BoE will cut rates at its next meeting.
 
The USD CHF rallied sharply higher in the overnight trade. This move, however, could not attract any follow through buying during the New York session as the U.S. stock market traded in a narrow range.  The trend has turned up once again on the daily chart, but the lack of follow through to the upside should be a concern.  Furthermore, financial instability in the U.S. because of the worsening credit crisis may cause Swiss traders to curtail their appetite for higher-yielding assets in the U.S. and trigger another sell-off.  The chart pattern remains bullish, however, but will quickly turn lower if 1.0842 fails to hold as support.  The next upside target is 1.1107, the February top.
  
The USD CAD posted its biggest drop in weeks as higher crude oil encouraged traders to liquidate their long positions.  The break also turned the main trend down on the daily charts, and sets the market up for a break back to 1.0351 to 1.0261.  Crude oil rose on speculation that the tropical storm in the Gulf of Mexico would shut-down refineries along the coast.  This is the news to watch for future direction.  If the tropical storm misses or reduces its intensity, the USD CAD may begin to resume its uptrend.  This is more likely to happen in the 1.3051 to 1.0261 price range.
 
The AUD USD made a new low for the year as traders are almost certain the Reserve Bank of Australia is going to lower borrowing costs on September 2.  Australian financial market traders are also confirming this first rate reduction in 12 years.  With the Dollar up and commodity prices down, continue to look for weakness to develop.  The charts indicate that the main trend will remain down until .8813 is crossed.  This could take time as the market needs to stop going down and build a support base first.   
 
The NZD USD is still holding the low for the month at .6823 but lower commodity prices and a possible rate cut continue to put downside pressure on this market.  The charts indicate that there is a possibility of a higher bottom forming, but the fundamentals would have to change drastically to support such a pattern. Currently, the best indication of a change in trend to up will occur on a breakout over .7215.  Unless this occurs, the market should continue to press the downside. Watch crude oil to see if strength develops which could trigger short-covering in other commodity markets especially gold.   

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