Dollar Fades Into The Weekend Without Confirmation Of A Housing Rebound

It takes an economic surprise on the magnitude of a surprise rate hike to stock volatility before an extended holiday weekend for traders in two of the three major FX hubs. Today?s existing home sales report failed to keep the ball rolling on yesterday?s data, once again offering as many questions for speculation than resolute answers.

Looking at the charts though, the dollar was on the lam well before the US data made its rounds. The euro was gradually carried 60 points higher from its overnight lows around 1.3410. Lacking the same directionality, USDCHF was trekking out another tight range measuring little more than 30 points. The perennial top mover GBPUSD was consolidating into a wedge whose swings measured 35 points with a low at 1.9835. Fighting the steady dollar selling in EURUSD, USDJPY rallied 90 points from an overnight spike low at 120.85 through risk aversion flows.
Traders across the US markets were closing their terminals early as they tried to get the jump on holiday traffic. Preparing for the day, the market was preparing for one scenario under which the dollar would mark a huge move and every other scenario that would allow the greenback to coast into the illiquid weekend. The deciding factor for one last trade was the April Existing Home Sales report from the National Association of Realtors. When the gauge hit the wires below expectations with a 2.6 percent drop in purchases over the period, the economic calendar officially lost its hold over the currency. Momentum had built through yesterday?s New Home Sales report for the same month, which reported the biggest jump in sales volume in 14 years. However, the headline number couldn?t confirm a turn in the housing sector alone. Since the jump in yesterday?s indicator was accompanied by the biggest drop in prices in over 30 years, it was unclear whether this was anomaly or a true turn in sentiment for the sector. When existing purchases - which account for 85 percent of the market - slipped to a near-four year low 5.99 million annual pace, the chance for confirmation of a rebound in housing evaporated. Bringing yesterday?s optimists back to reality, the average sell price rose 1.2 percent while supplies ballooned to their highest point since August of 1992. It may be up to the May housing numbers to truly give insight into the market?s overall direction.
Looking ahead to next week, we have a ton of top tier indicators stuffed into a shortened week. Monday will see limited liquidity due to the Memorial holiday that will close US markets and Whit Monday which will keep most traders in the UK, German and Switzerland at home. Whether or not this will present an opportunity for heightened volatility like that seen during this past Thanksgiving holiday, is still up in the air. However, with the dollar extended to major resistance, the line in sand is clearly drawn. If things aren?t shaken up on Monday, the economic docket will certainly have its go through the remainder of the week. The first revision for first quarter GDP is garnering a lot of interest due to its basement lows. On the other hand, Friday takes the prize for penciling the greatest level of event risk with NFPs, ISM manufacturing and personal spending all scheduled for release within an hour and a half of each other.
After closing out yesterday?s very active session with losses, equity traders were ready to reclaim some of the lost territory through calm buying. By 15:40 GMT, the Nasdaq Composite was leading the rally with a 0.65 percent advance to 2,554.32. The S&P 500 followed with a 0.54 percent increase of its own to 1,515.71, while the Dow rose 0.47 percent to 13,504.84. Though the gains around the market were rather consistent across the various sectors, the market movers list was still marking a few headliners. Playing catch up with the NYSE?s recent acquisition with Euronext, officials at Nasdaq announced that the company would pay $3.7 billion for Northern European stock market conglomerate OMX. The exchange?s share price fell 3.2 percent to $32.89 on the news. Another deal was reported between Coca-Cola and Energy Brands Inc, also known as Glacau. The purchase will run $4.1 billion for Coke, though investors were optimistic on the revenues as they bid shares 1.4 percent higher to $51.97.
Treasury yields have weathered thick and thin as they advanced for yet another session despite the disappointing housing data. Ten-year treasury notes were trading 6/32nds lower at 97-05 at 15:40 GMT as yields added 2 basis points to 4.863. At the same time, longer maturity bonds were off 10/32nds at 95-31 while yields grew 2 basis points to 5.012.