THE TAKEAWAY: U.S. Pending-Home Sales Surprise > Lower Prices Incite Buying > U.S. Dollar Bearish
Pending home sales in the United States unexpectedly rose in June as depressed prices coupled with lower borrowing costs provoked purchases of previously owned houses. The index of pending home resales rose by 2.4 percent in June, following the 8.2 percent gain in May, a report by the Nation Association of Realtors noted today. Similarly, resales increased by 17.3 percent, on a yearly basis, up from 15.5 percent in May. The data blew past expectations, with the median forecast, according to a Bloomberg News survey, calling for a 2.0 contraction in resales in June.
Euro-Dollar 1-minute Chart: July 26, 2011
Charts created using Strategy Trader– Prepared by Christopher Vecchio
The EUR/USD had an interesting reaction to the data, initially falling in favor of the Greenback on the better-than-expected U.S. data, though ultimately, the pair jumped 25-pips after the release, as noted by the chart above.
U.S. Pending Home Sales (YoY): July 2008 to Present
Courtesy: Bloomberg
Today’s housing data contradicts figures from earlier in the week, when the new home sales report was released. New home sales dropped by 1.0 percent to a 312K annualized pace, a three-month low, in June. A Bloomberg News survey suggested that the rate would be at 320K, up from the revised 315K rate in May. As foreclosures mount, it appears that construction is slowing, translating into purchases, if any, occurring in resales.
Following the release, the Dow Jones FXCM Dollar Index initially fell from 9408.33 towards a three-hour low of 9397.81. However, in the minutes after, the index quickly regained footing, climbing back towards the session high of 9414.81, to 9405.29, at the time this report was written.
Written by Christopher Vecchio, Currency Analyst
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