The US dollar remained in a narrow trading range against major forex counterparts, as a disappointing Pending Home Sales report was not enough to force the currency to fresh multi-session lows through late New York trade. The housing report showed that Pending Home Sales unexpectedly fell a substantial 2.6 percent through the month of October—nearly four-times consensus forecasts of a 0.7 percent decline. Yet such a bearish headline result was largely offset by upward revisions to September’s release at a healthy 3.7 percent monthly gain. Currency traders initially sold the greenback on the clearly disappointing October figure, but a later stabilization left the buck almost exactly unchanged at pre-release levels. Forex markets seem unwilling to force worthwhile dollar volatility on what looks to be a decisive week for key currencies such as the Euro and the British Pound.
Upcoming Bank of England and European Central Bank interest rate announcements remain the most highly-anticipated events of the week, with many traders choosing to stick to the sidelines ahead of the potentially market-moving releases. Combined with continued uncertainty surrounding the Dow Jones Industrial Average and other key risky assets, speculators are hesitant to open large positions ahead of key economic event risk. Further tumbles in US equity indices certainly bode poorly for general risk sentiment, and the US dollar may stand to benefit from a subsequent carry trade unwind.
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The Dow Jones Industrial average shed a 1.3 percent to 12,655 just half an hour of the New York session close—forcing a late Japanese Yen rally against higher-yielding counterparts. The key barometer for broader investor optimism now trades nearly 5 percent off of its yearly open, and the threat of further declines may keep a lid on substantive yen retrace through short-term trade.
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Written by David Rodríguez, Currency Analyst for DailyFX.com, [email protected] [/I]
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