Sept. 9 (Bloomberg) -- The dollar traded near the highest level against the euro since October as crude oil fell.

The greenback pared its gains after an industry report showed fewer Americans than forecast signed contracts to purchase previously owned homes in July. The Canadian and Australian dollars fell as a drop in oil and gold prices reduced the economic prospects for commodity exporters.

``Commodities are coming under renewed pressure,'' said Shaun Osborne, chief currency strategist at TD Securities Inc. in Toronto. ``We have seen the correlation between crude oil and the major currencies remain strong or strengthen over the past few weeks, so weaker crude oil should translate into a weaker euro.''

The dollar traded at $1.4129 per euro at 10:11 a.m. in New York, compared with $1.4128 yesterday. It touched $1.4047, the strongest level since Oct. 9, 2007. The yen gained 0.3 percent to 107.94 per dollar, from 108.28. The euro decreased 0.3 percent to 152.55 yen, from 152.96.

Crude oil for October delivery decreased 2.1 percent to $104.13 a barrel as Saudi Arabia's oil minister said supplies are sufficient to meet demand, signaling the Organization of Petroleum Exporting Countries may maintain production levels when it meets today. The euro-dollar exchange rate and oil had a correlation of 0.9 in the past year, according to Bloomberg calculations. A reading of 1 would mean they moved in lockstep.

The euro reversed its earlier gain after failing to sustain an increase above $1.42 today, convincing some investors that the dollar's 12 percent rally from the record low of $1.6038 set July 15 is sustainable, said Brian Dolan, chief currency strategist at FOREX.com, a unit of online trading firm Gain Capital in Bedminster, New Jersey.

`Parabolic Decline'

``The euro-dollar looks to be set for a parabolic decline to the $1.3830 and $1.3840 area,'' said Dolan.

The $1.3840 level is a 50 percent retracement of the euro's rise from the November 2005 low of $1.1640 to the all-time high of $1.6038 set in July, based on a series of numbers known as the Fibonacci sequence, according to Pak Lai Ng, a technical analyst at Forecast Pte in Singapore, citing charts that predict price movements.

The support level, where euro buy orders are concentrated, lies on an ascending trend line that began in February 2002, Ng said. Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low.

Royal Bank of Scotland Group Plc cut its forecasts for the euro versus the dollar today. The single currency will end the year at $1.40 before weakening to $1.35 by the end of the first quarter of 2009, it said. The bank's previous predictions were $1.50 and $1.45, respectively.

Housing Report

The index of pending home resales fell 3.2 percent after a revised 5.8 percent gain in June, the National Association of Realtors said today in Washington. The decline is the fourth this year as tighter credit conditions kept would-be buyers from taking advantage of lower prices.

The U.S. government seized control of Fannie Mae and Freddie Mac on Sept. 7 after the biggest surge in mortgage defaults in at least three decades threatened to topple the companies. The Treasury plans to provide secured short-term funding to Fannie, Freddie and 12 federal home loan banks.

The U.S. budget deficit will grow next year to a record $438 billion, the Congressional Budget Office said, making it harder for President George W. Bush's successor to either cut taxes or increase spending.

This year's shortfall will total $407 billion, the agency said today in a biannual report. The Bush administration estimated in July that next year's deficit will total $482 billion.

To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net; Agnes Lovasz in London at alovasz@bloomberg.net

Last Updated: September 9, 2008 10:13 EDT