Dollar Falls Sharply After Disappointing New Home Sales

Dollar falls sharply after downside surprise in new home sales. New home sales fell by 3.9% to 0.85m annualized rate in Feb, much weaker than expectation of a rise to 0.99m and being the lowest monthly pace of sales since Aug 2000. Jan’s sales was also revised lower from 0.94 to 0.88m. Markets will likely take this data more seriously than the better than expected existing home sales data last Fri. That’s because new home sales are usually considered a more timely gauge of housing market activities since they’re recorded when a contract is signed while existing home sales are recorded when a contract is closed a month or two later. Today’s data will now make Bernanke’s testimony on Wednesday more important as he will definitely be questioned by law makers on recent sub-prime fallout and a further slowdown in the housing market.

Technically speaking, dollar’s recovery against majors, except yen, has likely completed today. Cable’s break of near term resistance and Aussie’s break into new high of 0.8097 are the first warnings. If that’s the case, further weakness should be seen in other majors including Euro and Swiss which should get then past near term support/resistance too and bring retest of recent high/low.


Daily Pivots: (S1) 1.2136; (P) 1.2163; (R1) 1.2215;


USD/CHF’s sharp decline in early US session suggest that recovery from 1.2029 has completed at 1.227 earlier today, just limited by mentioned 1.2228/30 cluster resistance (61.8% retracement of 1.2354 to 1.2029 at 1.2230, 38.2% retracement of 1.2550 to 1.2029 at 1.2228) as expected. At this point, further fall should be seen towards 1.2075 support. Break will confirm this case and bring retest of 1.2029 low with 78.6% retracement of 1.1879 to 1.2571 at 1.2027. Firm break will confirm recent decline has resumed for next downside target of 1.1879 support (06 low).

In the bigger picture, medium term outlook remains bearish with USD/CHF staying below both 55 days EMA and 55 weeks EMA. Daily and weekly MACD are staying negative, supporting this view too. The preferred interpretation at this point is that the whole down trend from 1.3283 is still in progress with the first move from 1.3283 finished with three waves down to 1.1919. Subsequent rebound to 1.2768 was the interim correction nand price actions from there represent resumption of such down trend. Sustained break of 1.1878 will add more credence to this view and bring further medium term weakness towards 100% projection of 1.3283 to 1.1919 from 1.2768 at 1.1404.

However, note that USD/CHF is still bounded in wide range of 1.1878 to 1.2768. A rebound to above 1.2354 resistance will dampen this view and indicate that the fall from 1.2571 has completed after meeting 1.2027 fibo support. Another rise could then be seen to retest this high and then the upper end of the range at 1.2768.

USD/CHF 4 Hours Chart - Learn Forex, Trade Forex, Forex News, Forex Headlines

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Shing-Ip Tsui is the founder and CEO of ActionForex is set up with the aim to empower individual forex traders by providing insightful contents. Analysis reports, live pivot points on majors and crosses, etc are provided with collection of carefully selected educational articles and free trading ebook downloads.