24/06/'07 - US Existing Home Sales

[B]Economic News[/B]


Last week with little in the way of news releases, the greenback weakened a bit against most currencies apart from the JPY. It looks as if the carry trades are stronger than the general market trend. Towards the end of last week, we saw a glimpse of positive news for the USD as the Leading Index came stronger than expected and the Philadelphia Fed Manufacturing Survey tripled expectations. The good news didn’t do much, and the negative trend continued.

Today’s most important release will be coming from the very important housing market - Existing Home Sales. The Existing Home Sales measures the annualized number of existing residential buildings that were sold during the previous month. A rising trend has a positive effect on the nation’s currency because large purchases tend to be made by consumers that are optimistic and confident in their financial position. The sale of a home also triggers commissions for real estate agents, and often home owners will purchase goods such as appliances and furniture shortly after purchasing a home. This report is closely scrutinized as it’s the month’s first demand-side housing indicator to be released. This month, the forecast for the release is 5.96M with a previous figure of 5.99M last month. The spring is a strong season for Home Sales and May is usually one of the most active months. Because the data on new building permits and housing starts has been weak, it’s likely to see weakness in existing home sales as well. There is a Surplus of inventory that is likely to be sold at lower prices. This week will be quite rich with US news events such as the Consumer Confidence, Durable Goods, GDP, the Chicago PMI, and the Fed’s Interest Rate Statement.


Although most of the news that came from Europe last week was weaker than expected, that didn’t stop the EUR to rally up all throughout the week, strongly pointing to the 1.3500 again. The most impressive move was made by the EUR/JPY which continues to be traded at record levels, and shows intense bullish momentum. With practically no news expected to come from Europe this week, it is quite clear that most of the price action will be coming from the US market, and its very rich upcoming economic calendar. With regards to the EUR/USD, the most important event would be the FOMC Rate decision which is widely expected to remain unchanged at 5.25%, and might help push the pair further up with the lack of positive USD releases to block the expected appreciation.


Despite the few small positive signals that the JPY might be experiencing, it is still quite clear that its performance is still very poor, and it is overcoming all the negative US news releases and still weakening against the USD. Although it appears that economic new events that come from Japan seem to have no influence on the ongoing bearish trend of the currency, it would probably not be true this week. There are several releases expected to come from Japan this week such as the Trade Balance, Large Manufacturing Conditions, and the BOJ meeting minutes, and together with the packed US week, might caused some price shifting out of the range we have grown accustomed to.

[B]Technical News[/B]


The pair has made a significant move from 1.3260 to the 1.3450 levels and according to the daily charts is heading strongly to 1.3500. If a break will occur beyond that level, we might see a violent move following. If a break will not happen, the pair will probably range trade between 1.3350/1.3450.


The cable is trading at critical levels near 1.9990, and is slowly pointing to the very important resistance of 2.0000. This very important level, if broken; will probably take the pair back to the 2.0100 levels back again and even further.


After a short consolidation period, the pair seems to be reestablishing the bullish move, as clearly derived from the daily charts. The current move is heading to the 124.40 levels, and a preferable strategy would be to wait for the hourlies to unwind before entering the market at a better point.


The pair has been consolidating at 1.2300 after a sharp bearish move from the 1.2450. There is a bullish cross forming on the hourly charts, indicating that there might be a correction move before the daily bearish trend resumes.

[B]The Wild Card


The pair seems to be establishing a bullish trend after a very long and sharp downtrend that took it to record lows. This turning point provides forex traders with an opportunity to enter the market at a very good point for a long position as it is traded at a very low price, and the direction seems to be up.