Dollar slips on disappointing new-home sales data

The Dollar fell against most major currencies on Monday after February US New Home Sales data dropped to the lowest rate since June 2000, boosting expectations of a Federal Reserve interest rate cut. This apparent collapse in New Home Sales to only 848k in February, from 882k (revised down from 937k) in January and 1’047k in December, seems to suggest that the housing market has gone into free fall again.
The data renewed some fears that weakness in the sub-prime mortgage market could undermine the broader housing market and other economic sectors.
Market awaits Fed Chairman Ben Bernanke’ congressional testimony on Wednesday.

News and Events:
The Dollar fell against most major currencies on Monday after February US New Home Sales data dropped to the lowest rate since June 2000, boosting expectations of a Federal Reserve interest rate cut. This apparent collapse in New Home Sales to only 848k in February, from 882k (revised down from 937k) in January and 1’047k in December, seems to suggest that the housing market has gone into free fall again. This fall in the last two months can be attributed to the unseasonably cold weather; but this report is still worrying as sales were revised down over the past six months and the number of home for sale rebounded to a 5 month high. Analysts said Monday’s economic data was quite a turnaround from expectations that the worst of the housing market slowdown was over. The data renewed some fears that weakness in the sub-prime mortgage market could undermine the broader housing market and other economic sectors. Speaking in Beijing on Monday, Chicago Fed President Micheal Moskow said problems with high-risk mortgages were not spilling over to the rest of the US housing market. However, traders would await Fed Chairman Ben Bernanke’ congressional testimony on Wednesday.
EurUsd rose 0.41% to 1.3329 after hitting intraday high 1.3347. UsdChf dropped -0.34% to 1.2154 and GbpUsd rose 0.43% to 1.9685 after hitting 1.9724 high.
The Dollar pared losses against the Yen and ended 0.16% to 118.24 after an intraday low 117.64. Expectations for Japanese inflation data set for release on Thursday eroded some Yen support.

Today’s Key Issues:

EUR 09:00 GMT: March German IFO Business Climate 106.5 vs 107, Current Assessment 111 vs 111.6 and Expectations 102.3 vs 102.6

GB 09:30 GMT: 4Q Total Business Investment 3.3% unchanged (QoQ) and 11.1% unchanged (YoY).
February BBA Mortgage approvals 47K vs 37.8k

USD 10:00 GMT: Fed’s Pianalto speaks in Prague on currencies

GB 10:45 GTM: Bank of England Governor King testimony, February inflation report

US 15.00 GMT: March Consumer Confidence 109. vs 112.5 Richmond Fed Manufacturing Index previously -10

US 22:00 GMT: ABC Consumer Confidence March 25th previously -5

NZD 23:45 GTM: February Building Permits previously 3.9%

The Risk Today:

EurUsd return in positive area over 1.3260 support. The outlook remains positive to neutral. Renewed weakness below 1.3260 would pave the way for a decline towards 1.3200 (50% retracement of the rally from 1.3072 to 1.3412). A break there would open the risk down toward 1.3180. On the topside, initial resistance is at 1.3347. There is little resistance toward 1.3411 and then 1.3480.

GbpUsd outlook remains positive following the push through last week’s 1.9500 high and the 1.9517 former resistances. 1.9675 resistance has been cleared and open the way for 1.9750 important resistance, early February high. Initial supports marks 1.9582 yesterday low.

UsdJpy continues its choppy consolidation phase, but as long as the 118.50 to 118.88 range resistance holds; focus remains on the downside with a support 116.81. Renewed weakness may clear following 115.76 and the 115.55 support and open the way for a run toward 115.15 trend low from early March.

UsdChf downtrend from 1.2573 to 1.2030 seems not over. The recent correction has found resistance at 1.2218 (the overnight high, key and pivotal resistance) and 1.2228; a clear break of those level is required to suggest scope for gains towards 1.2263. There is still a possibility to see further weakness below 1.2030, after what there’s little support till the 1.1881 early December low.

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