The US dollar advanced against the euro today at an average pace of about 5-10 pips per hour as US stocks extended losses, failing to get any benefit from the economic data on consumer spending and personal incomes.

Since the credit crisis started, MarketWatch reports, the US dollar has often gained support from weak stocks as investors shift out of riskier assets and into the US currency for its status as a relative safe haven. Falling risk appetite also tends to support the yen. This could explain the strength of both the US dollar and the yen today.

It looks like we are going to close the day in EUR/USD with a strong Bearish Engulfing pattern, which is a good development for my short position in this forex pair. This week is quite rich in economic data culminating, of course, with the NFP at 12:30pm GMT on Friday.

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The Euro is trading above 1.2700 urrently (06:13 am GMT). The forex market got thinner after the release of two worse than expected US economic reports yesterday. Forex speculators may be looking forward to today’s keynote speech by Fed Chairman Ben Shalom Bernanke at the banker’s conference in Jackson Hole, Wyoming.

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Not much so far (11:24am GMT). The Flash Manufacturing PMI data, announced earlier, was received with a shrug from forex traders. The market has been drilling between 1.2728 and 1.2682 ever since then. Quite an uneventful European morning session. Perhaps the cowboys will start the rodeo?

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The US dollar mostly weakened earlier during European trading, however as the GDP q/q data release is approaching (in about a half hour, at 12:30pm GMT) the US dollar is growing stronger with EUR/USD reaching a low of 1.2777, indicating that forex traders are back in the quest to safe-haven currencies (US dollar, yen).

“Better European growth news doesn’t alter the fact that the drivers of the euro’s recovery against the dollar are all pretty much played out,” wrote strategists at Societe Generale, cited by MarketWatch. “The sovereign credit crisis faded, European short-term rates rose, U.S. bond yields made a huge downward adjustment, and as we can see, European growth dramatically outperformed the U.S.”

Second-quarter GDP growth for the US economy, the world’s largest economy, is seen likely to be revised lower today in about 30 minutes after data on international trade for June released earlier this week showed an uptick in imports and a sharply wider deficit between exports and imports.

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The US dollar strengthened its position against the euro today, extending gains for a 4th day against the European currency, thereby ending the uptrend in EUR/USD. The forex market right now looks like it’s full of fear of a global slowdown. According to reports (MarketWatch, etc.) many investors abandon the stock market and other riskier assets to rush into the safe havens of the US dollar, the yen and T-bills, of course.

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