According Elder, it seems to be a new trend of EUR/USD:

But from the other point of view - the trend can continue it’s flow.

HURRICANE RITA HAD ONLY MODEST IMPACT ON OVERALL SALES

It seems to be true. USD has a good chance.

By Vicki Schmelzer
NEW YORK, Sept. 26 - The dollar closed near its lows against the euro and other major currencies Monday, with the day’s declines viewed more as a much needed correction rather than a change in market sentiment.

Indeed, despite the euro gains on the day, traders continued to favor a break below psychological support at $1.2000 more than they did a rebound back over $1.2150.

For the bulk of the summer, the euro has held within a $1.2000 to $1.2500 range, and has breached these trading parameters only on two occasions and for very different reasons.

In late June, following the French and Dutch “no” votes on the EU Constitution, there were concerns that the European Central Bank might lower eurozone interest rates.

The euro dipped on lows near $1.1866 on July 5, before bouncing back over $1.2000 a few days later.

On Sept. 2, there was an unforeseen rally to $1.2590 due to Katrina-induced dollar selling. The euro closed back below $1.2500 on Sept. 6.

Since June, market players have been looking forward to the post-Labor Day FX environment, where a new dollar trend would be surely unveiled, traders said.

Now, three weeks later the FX waters are as muddied as ever, with Hurricane Katrina and Hurricane Rita wrecking additional havoc, they added.

“There’s a lot of emotional exhaustion going on right now,” said one U.S. corporate strategist.

She along with other corporate strategists noted that U.S. firms have been active buyers of dollars in recent sessions, she said, not only because of Homeland Investment Act repatriation, but also due to quarter-end bookkeeping.

Watching currencies like the euro sink nearly 5.9% from the Sept. 2 highs at $1.2590 to Monday’s lows near $1.2012, there is a sense of urgency to buy dollars now, rather than later.

“In Aussie, they were talking about $7700 or $7800 (Sept. 12 high $0.7764) just a few weeks ago — now here we are at $0.7550,” a corporate strategist observed.

Euro-dollar closed at $1.2070, down from the day’s highs near $1.2076 in U.S. action and up from the overnight lows near $1.2012.

In other pairs, sterling closed at $1.7784 and dollar-yen at Y112.20, after holding in respective ranges of $1.7705 to $1.7790 and Y112.18 to Y112.59.

Last week, the euro saw a high of $1.2270, sterling a high of $1.8150, and dollar-yen a low of Y110.94.

Earlier in the day, Federal Reserve Chairman Alan Greenspan stayed on point in his speech on mortgage banking to the American Bankers Association and offered no new insight into monetary policy.

There are a host of other Fed speakers later in the week who will attract attention as market players debate whether the Fed will raise rates only one more time in 2005, or two more times.

The dollar would likely find renewed support if it became clear that the fed funds rate would end the year at 4.25% instead of at 4.0%, as is currently priced in.

At 8:45 p.m. EDT Monday, Kansas City Federal Reserve President Thomas Hoenig, a non voting member, speaks about the U.S. economy.

Tuesday at 12:00 p.m. EDT, San Francisco Fed President Janet Yellen, who will be a voting member in 2006, will offer her take on the U.S. economy.

Then, at 2:45 p.m. EDT Fed Chairman Greenspan addresses the National Association for Business Economics.

In addition to these Fed speakers, market players awaited the release of the Conference Board’s consumer confidence data. The median estimate in a International survey of economists looks for consumer confidence to fall to 94.00 in September, compared to the 94.0 seen in August. Estimates range from 89.0 to 98.0.

In other markets Monday afternoon, spot gold was closing at $466.80/oz., at the day’s high and up from an overnight low of $459.40. Last week, gold posted a nearly 18-year high at $475.00, before a wave of profit-taking sent the precious metal back below $470.00.

NYMEX November light sweet crude oil futures settled at $65.82 per barrel, up from an earlier low of $62.82 and also up from Friday’s settlement at $64.19.

The dollar retained a firm tone against the Euro on Friday and a break of 1.21 pushed the currency to highs beyond 1.2050 in New York. The dollar was able to retain a firm tone in early Europe on Monday with a move to 1.2015, but the dollar was unable to push through 1.20 and retreated to 1.2045.

With oil damage less than feared, the markets are now more confident that the Federal Reserve will maintain the policy of interest rate increases over the next few months. The dollar has been gaining support from interest rate differentials over the past few months and expectations of further rate increases will offer near-term support to the US currency. The comments from Fed Chairman Greenspan will be potentially very important this week and the dollar will secure support if Greenspan is optimistic over the economy. The dollar has, however, already discounted the rate increases which will make it difficult to secure further gains on yield grounds alone. Confidence levels will also be watched carefully as there is still the risk that underlying consumer and business confidence will sustain longer-term damage, especially as energy levels are still at elevated levels and savings rates are very low.

The US structural deficits should not be ignored, especially as Greenspan was reported to have stated that the US budget deficit was out of control during the weekend G7 talks. There will also be unease that the trade deficit will be subjected to renewed upward pressure in the short term, particularly with higher energy imports. There is, therefore, still likely to be caution over aggressive dollar buying in the short term, especially if Greenspan chooses to make public warnings on the deficits this week. The attitude of international central banks will be very important at current levels and there is the potential for increased Euro buying as part of a reserve diversification process which should help cushion the currency from further sharp losses.

NEW YORK (Reuters) - Offshore U.S. crude oil production in the Gulf of Mexico was totally shut on Saturday with natural gas output also lower, the U.S. Minerals Management Service said in its daily report logging the impact of Hurricane Rita and the prior Hurricane Katrina.

MMS said the percentage of oil output shut was 100 percent, up from 99.125 percent on Friday. The normal daily oil output from Gulf of Mexico operations is 1.5 million barrels per day.

The report said 1.5 million bpd of crude oil production was shut as Saturday, in contrast to 1.486 million bpd reported shut on Friday.

For natural gas, 7.488 billion cubic feet per day, or 74.88 percent, was shut Saturday. On Friday, 7.204 bcfd, or 72.04 percent, was shut. The normal daily natural gas output is 10 bcfd.

Weekends. Market is closed, but all traders are waiting for the results of RITA.
Reuters says : “Hurricane Rita caused anywhere from $2.5 billion to $6 billion in insured losses in astern Texas and western Louisiana, three major catastrophe risk modeling companies said on Saturday, far less than was feared as the storm lost steam before striking land.”

But the real problem is the OIL MARKET. USD positions depends on oil prices.
Let’s wait and see.

Blue line - the trend caused by FOMC decision.
Green line - the trend caused by RITA info and high oil prices.