The US dollar bashing witnessed overnight lost its intensity in NY trading, but the buck continued to trade better offered nonetheless. One caveat is that Treasuries did not confirm a rally in risk story. Should the small equity gains prove short-lived, we expect the US dollar to come back better bid short-term. Much of the weakness in the buck has been headline driven with calls from the UN for global reserve alternatives and China worries about the US money printing.

There is nothing new here but reminding the market about these headwinds on the first day of post-summer trading weighed on the greenback. Nonetheless, a recovery in the buck would have negative implications for oil and gold first and foremost as these have been major beneficiaries of the USD's recent demise. Speaking of gold, we saw a major rejection on a test above the $1000 mark but the precious metal remains better bid while above daily trendline support near the 991/992 zone.

Other near-term rejections include EUR/USD testing the air above 1.45 but scurrying back below ahead of the close. Talk of large stops below 1.4450 continues to make the rounds and we would think that an earnest drop through there could be quite dramatic. USD/JPY was in massive consolidation mode in NY trading and practically traded between 92.35 and 92.00 all session. The pair looks to be in an hourly pennant formation which tends to resolve lower. Resting stops lurk near the 91.75/70 July lows but below the potential for a visit to 91.00 is very real should we take these out.

More bad news on the data front as US consumer credit contracted a record -$21.6 billion in July. Credit outstanding is now -$109 billion off the cycle high but we believe another -$550 billion or so is needed to get debt levels back to sustainable levels. This is roughly 5% of annual consumer spending and suggests that, should the consumer decide to de-lever in a significant way, corporate earnings will suffer. This is one of the reasons we believe 2010 earnings estimates are optimistic and current equity prices expensive.

Upcoming Economic Data Releases (Asia Session) prior expected

9/8 22:45 GMT NZ  NZ Card Spending (MoM)  AUG  0.8  - - 

9/8 23:01 GMT UK  Nationwide Consumer Confidence  AUG  60  62 

9/8  JN  Cabinet Office Monthly Economic Report  8-Sep   

9/9 1:00 GMT AU  Westpac Consumer Confidence  SEP  3.70%  - - 

9/9 1:30 GMT AU  Retail Sales s.a. (MoM)  JUL  -1.40%  0.50% 

9/9 1:30 GMT AU  Home Loans  JUL  1.10%  -1.00% 

9/9 1:30 GMT JN  BOJ Board Member Miyako Suda to Speak in Nagasaki City

9/9 5:00 GMT JN  Leading Index CI  JUL P  79.9  81.9