October 24, 2013
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No Profoundness On Falling US Home Sales

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Economists reported that existing home sales dropped by 1.9% M/M in September to 5.29 million units, in line with consesnsus estimate. The decrease is attributed on the back of a downtrend 0.0% print in August where previous expectations posted a 1.7% rise and a 6.5% leap in July. BNP Paribas forex brokers noted pending home sales have been falling since July, while mortgage applications to buy dropped to its lowest level in 2013. This implied an earlier strength in home buying activity and as much “fence sitter” were urged to place purchases. But Barclays has been noticing some unwinding of this strength earlier.

Home Buying Activities

Initially, forex brokers saw the firming of home sales in the third quarter signalled brokers’ commissions which now comprised for a quarter of residential investment in GDP. This is a significant contribution according to Barclays which offsets some mildness in the new construction indicator. This is caused by housing starts weakness at the latter part of the second quarter. The lack of September data on housing starts and new home sales make it harder to estimate for the pace of growth in residential investment in third quarter. Meanwhile, the existing home sales report is pointing to a closer estimate of 5% Q/Q by Barclays from a huge slowdown in pace by 14.2% last second quarter.

Debt Markets

On the US bond market space, Barclays bond markets posted small topping patterns on Friday, which are likely to provide a breather for the recent bullish moves. The uptick in US yields is helping to provide a bid for the US dollar in FX space against both emerging and major markets over the near term. Given the forex brokers’ expectation of probable interest to buy the USD against nearby range extremes in major currency pairs, such as GBP/USD, EUR/USD and USD/CHF, the forex brokers are looking for a pullback within recent ranges before US dollar selling resumes.

FX Trading Volumes

Volumes dropped sharply into the end of the week as none of the G10 currencies were able to achieve activity above its 50th percentile for the past year. EUR/AUD has seen declining activity with recent downticks, which suggest waning investor commitment to the downmove in the near term. Low volume “doji” candles in EUR/USD and USD/CHF signal lack of investor interest at range extremes and possible near-term reversal risk.

EUR/AUD has seen declining activity with recent downticks, which suggest waning investor commitment to the downmove in the near term. Forex brokers maintain a bullish view on AUD/USD, looking to buy dips, while price stays above the 0.9560 area. Targets are to 0.9760 (200-day) and potentially 0.9920 in the coming weeks.

On the EUR/USD cross, the FX market is facing its 2013 peak near 1.3710. While this may hold firm on initial attempts. Barclays is looking to buy dips into the 1.3610/45 area for an overthrow beyond 1.3710. Higher targets are near a trendline at 1.3990, which provide strong resistance.

Low volume “doji” candles in EUR/USD and USD/CHF signal lack of investor interest at range extremes and possible near-term reversal risk.

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