dailyfx financial markets headlines

The convulsive, range-bound activity in the dollar based pairs that was expected because of the intensifying economic schedule and the countdown to the FOMC meeting kicking off tomorrow, had another spasmodic attack following a mix of fundamental fodder.  Amongst the majors, price action is tailoring off to make for a number of technical setups.  In the benchmark EURUSD, a run up in the euro to a five day high around 1.2620 was slowly backed down 60 points before drifting back into the mid of the range.  Perhaps the biggest nail bitter was the dollar’s action against the Japanese yen.  A quick spike above the now strong 116.55 resistance just before the beginning of the North American session, put shorts on the edge of their seats before being battered down 60 points.  Both the pound and the swissie are undergoing contracting ranges, with the former consolidating to horizontal support around 1.8260 and the latter increasing pressure at 1.2410.

The economic flow out of the US was in a full roll Tuesday morning with indicators of existing home sales, regional Fed manufacturing and consumer confidence putting the dollar on its toes.  With all the indicators posting simultaneously, there was little chance for the dollar to build momentum either way since the two headline figures provided contradictory sentiment.  Beginning with the bad, existing home sales in May dipped 1.2% on the back of a more severe 2.2% contraction the month before.  The solid figure for the annual pace of home sales market 6.67 million units, the slowest pace since the beginning of the year.  While this contraction was inline with the general consensus among housing data, its more immediate effect was to completely negate yesterday’s surprisingly positive new home sales report.  Any feeling that the Fed is full-steam ahead for a 50 bp hike this time around or an assured 25 bp move in August based on a rebounding housing market has completely dissipated.  Moving on to the good, consumer confidence rallied a greater than expected 105.7, offsetting some of the large decline over the previous month.  The Conference Board’s survey of 5,000 households revealed Americans are more confident about the future, but less so about their current situation. The expectations component of the read advanced to 87.6 from 85.1 in May.  This was largely due to leveling off gas prices and greater expectations for the job market.  Following last month’s contraction in the unemployment rate to 4.6%, a low not since July 2001.  However, consumers’ assessment of how they are position now actually fell with a read of 132.7 from 134.1.  Those responding with the perception that jobs were plentiful fell to 28.1% of the sample group. Given recent positive numbers in claims numbers, this could be a viable impression though with firms taking in higher input costs and lending rates it may not be reasonable for the three to six month term the survey covers.  Loosing much of its market impact potential, the Richmond Fed issued a manufacturing index read of the region at 4.  A figure both flat and below expectations of a round 7 read.

Stocks were moving lower by mid-day on US exchanges and OTC markets as a cautious tone loomed over the market even with a sentiment read that looks promising for spending habits.  Pacing the decline for the session, the NASDAQ Composite was off 0.7% to 2,118.35, followed by a 0.6% decline in the Dow to 10,981.09 and a 0.3% dip in the S&P 500 to 1,246.22 by 15:45 GMT.  Making the headlines in the equities pages again, GM announced 35,000 of its employees intended to take the company’s buyout package – 10,000 more than expected.  Shares of the automaker were down $1.40, or 5%, at $26.35.  Another giant amongst firms, DuPont, saw its shares reeling from a massive sell off.  Vivendi dumped 16.4 million shares, equivalent to $671 million or $40.82 per share.  Shares of DuPont were trading at $40.95, down 2.5% or $1.06, by mid-day.
 
Treasuries were trading slightly higher on the day as the drop in existing home sales slightly offset expectations of further rate hikes after this week’s and in doing so, securing existing issues with lower yields.  The 10-year note was up 6/32nds of face to 99 12/32nds with yields 3 basis points lower at 5.21.  Longer 30-year bonds were 14/32nds higher at 88 30/32nds with yields also off 3 basis points at 5.24.

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