Dollar's Pain in Slow Trade

A soft US existing home sales added to the continued squeeze on the dollar. The yen was the top performer on Monday while the US dollar lagged. The calendar is blank in Asia-Pacific trading but Chinese and Japanese stocks are always a risk.

As we reported yesterday, US dollar longs were at a six-week high on the CFTC positioning report. The three currencies most likely to be held on the other side of the trade were AUD, JPY and GBP. It comes as no surprise that those were the best performers on Monday as funds scale back exposure in quiet markets ahead of next week's FOMC meeting.

The dollar suffered in Asian and European trading and a final leg of losses hit following a disappointing existing home sales report. The sales pace was 5.08M compared to 5.25M expected. The miss helped EUR/USD break through the July 11 high of 1.3207 to 1.3218 before it closed the day back near 1.3185.

The 55-day moving average was a key figure on a number of charts. Cable broke through in European trading and continued racing higher to 1.5384. USD/CAD also fell below the 55-dma and gold is now within striking distance of the mark, which is at $1341.

Commodities were broadly higher with the exception of US crude. On Tuesday, US Congress will scrutinize Wall Street's involvement in the commodity business and that threatens further volatility, especially in the industrial metals. Copper, aluminum and nickel have been cited as key indicators of global economic health but with revelations about nefarious stockpiling we warn to be cautious about drawing conclusions over the coming weeks.