U.S. Pending Home Sales Dropped Less Than Forecast; AUD/USD Declined
THE TAKEAWAY: The U.S. Pending Home Sales Dropped Less Than Forecast> Sales in Northeast region suffered biggest loss due to Hurricane Irene >The AUD/USD pair turned bearish.
The report issued by the National Association of Realtors showed that the pending home sales in August dropped 1.2 percent from the previous month, following the June’s retreat of 1.3 percent. The reading, however, was better than forecast as economists polled by Bloomberg survey had predicted the further decline of 2 percent in pending home sales. From a year prior, the index has increased 13.1 percent. The pending home sales tumbled for the second month that reinforced concerns on U.S. housing market and economic growth prospects as well. Since labor market did not witness any improvement in August with no job added and unemployment rate remained very high at 9.1 percent, lower prices and borrowing costs were not enough to lure home buyers.
U.S. Pending Home Sales: February 2010 to Present
Prepared by Trang Nguyen
Three of four regions throughout the United States saw declines in number of contracts to purchase previously owned home. The Northeast region experienced the largest loss of 5.8 percent as a result of significant disruption by Hurricane Irene, according to NAR chief economist Lawrence Yun. Meanwhile, sales in Midwest and West also fell 3.7 percent and 2.4 percent, respectively. In contrast, 2.6 percent gain in the South helped reduce the total loss of pending home sales in the month.
Charts created using Strategy Trader– Prepared by Trang Nguyen
The negative effect of a decrease in sales of U.S. previously owned dwellings in August from a preceding month might be priced in the AUD/USD pair before the report released. Therefore, when the figure printed better than forecast, the greenback regained its footing against its trading partner Aussie. As can be seen from the one-minute AUDUSD chart above, the currency pair dropped 60 pips from 0.9870 to 0.9810. Within 45 minutes following the release, the Relative Strength Indicator (RSI) signaled twice that currency pair was sliding into oversold territory. At the time this report was written, the RSI was still below 30-level and drifted further to 23.09. This is indicative of massive high-yield currency sell-off in favor of the dollar in the monetary market.
Written by Trang Nguyen, DailyFX Research Team
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.