U.S. equity markets are trading sideways to higher at the mid-session in a lackluster trade. Upside momentum has slowed compared to yesterday, but there doesn’t seem to be a strong conviction to the upside either.

Technically, the September E-mini S&P 500 has a chance to test a key Fibonacci retracement level at 1088.00.

December Treasury Bonds are trading lower. Today’s weakness is a combination of lack of conviction ahead of Friday’s job report and a tired market.

Technically, the T-Bonds are still under pressure because of the closing price reversal top at 135’19 on August 25. On the downside, this market still has a chance to test a key retracement zone at 130’17 to 129’11.

The U.S. Dollar is trading flat to lower at the mid-session as traders remain cautious ahead of Friday’s U.S. Non-Farm Payrolls Report. Earlier this morning the Dollar showed little reaction to the European Central Bank’s decision to hold interest rates steady and a slight drop in U.S. Weekly Initial Claims.

Jobless claims remained a concern among investors because they remain at a high level. This is an indication that the U.S. economy is cooling while fueling worries that the recovery may not be sustained if private firms continue to refrain from hiring new workers.

The September Euro is holding steady following the ECB’s decision to hold interest rates steady. The market had a positive reaction to the comment from ECB President Trichet who said the recovery “should proceed at a moderate pace”.

Mortgage issues are helping to put pressure on the September British Pound. A choppy stock market is leading to mixed results in the commodity-linked currencies. The New Zealand Dollar is trading better, but the Australian and Canadian Dollars are trading flat which may be a sign that Wednesday’s strong rallies may have been overdone.

Although the Dollar is down this week, many large traders and institutions have been on the sidelines due to tomorrow’s employment report and Monday’s U.S. Labor Day holiday leading to speculation that this week’s action was due to thin trading conditions.