THE TAKEAWAY: U.S. Pending Home Sales Beats Forecast > Housing Market Shows Improvement > USD Bullish
Bucking the recent trend of poor housing data, May’s pending home sales data from May signaled that the sector’s bearish advance may be declining. The National Association of Realtors index of pending home resales increased by 8.2 percent in May from April following the month’s revised 11.3 percent drop from March, noting the decline was smaller than originally reported. The data blew through economists’ expectation of a 3.0 percent gain, according to a Bloomberg News survey. Pending home sales increased by 15.5 percent on a year-over-year basis in May, after falling by a revised 26.6 percent in April.
Following the release of the data, the EUR/USD pair, which already had been trading lower as the markets unwound long positions in a typical ‘buy the rumor, sell the news’ fashion, saw a short continuation, leading to a 20-pip rally in favor of the Greenback, sending the pair from 1.4370 down to a shade below 1.4350 on the report. Commentary out of various European Union officials, in response to theGreek parliament passing medium-term austerity measures, negated the effects of the positive housing data, however.
Euro-Dollar 1-minute Chart: June 29, 2011
Charts created using Strategy Trader– Prepared by Christopher Vecchio
Generally speaking, the pending home sales figure is a good proxy for the coming months of growth in the housing market, as the turnover between pending home sales and new home sales is typically a two-month period. That being said, should the National Association of Realtors issue another strong report in July, a rebound in the housing sector could be on track as soon as September.
U.S. Pending Home Sales (YoY): June 2008 to Present
Courtesy: Bloomberg
Following the release, the Dow Jones FXCM Dollar Index jumped, from 9636.15 up to as high as 9646.51. However, at the time this report was written, the index has fallen back to 9628.60. The index remains off of session lows, which occurred during the Greek vote, at 12:50 GMT, at 9614.59.
Written by Christopher Vecchio, Currency Analyst
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