Dollar Firmer After New Home Sales

Dollar strengthens after better than expected new homes sales report which rose 16.2% to 0.98M annualized rate in Apr, much stronger than expectation of 0.86M and being the fastest jump in 14 years. Recent housing data has been mixed and markets will turn attention to tomorrow’s existing home sales on more evidence on whether the worst in the US housing markets is behind us.

Other US data are mixed. Durable goods orders rose less than expected by 0.6% in Apr, comparing to expectation of 1.0%. However, ex-transport orders rose much stronger than expected by 1.5% comparing to consensus of 0.6%. Also, there were strong upward revisions to Mar’s data with headline orders up from 3.7% to 5.0% and ex-transport orders up from 1.4% to 1.5%. Jobless rose more than expected to 311k.

Euro was a tough weaker after Germany Ifo Business Climate which held steady at 108.6 in May, missing expectation of a rise to 108.8. Also, the Current Situation index dropped slightly from 113.1 to 112.5 though Business Expectation index rose slightly from 104.3 to 104.8. After all, business confidence is still firm high in the Germany and points to solid growth down the road.


Daily Pivots: (S1) 1.2240; (P) 1.2275; (R1) 1.2312;


USD/CHF rebounds further in early US session after retreat from 1.2331 was supported by 4 hours 55 EMA. At this point, intraday bias will stay on the upside as long as USD/CHF stays above 1.2263 minor support and retest of 1.2331 high should be seen. Break will indicate recent rise from 1.1993 has resumed for 61.8% retracement of 1.2571 to 1.1993 at 1.2350. Below 1.2263 again will indicate consolidation from 1.2331 is still in progress. But still, rally from 1.1993 is good shape with short term rising trend line (now at 1.2193) remains intact.

In the bigger picture, previous break of 1.2282 cluster resistance (50% retracement of 1.2571 to 1.1993 at 1.2282) confirms that fall from 1.2571 has already completed at 1.1993 with bullish convergence condition in daily MACD and RSI. More importantly, this will increase the chance that USD/CHF is about to complete a medium term head and shoulder bottom formation (ls: 1.1919, h: 1.1878, rs: 1.1993). Sustained break of 61.8% retracement at 1.2350 and neckline resistance (1.2768 to 1.2571, now at 1.2350) will add more weight to this case. Stronger rally should then be seen to 1.2571 first and then 1.2768.

However, below 1.2124 support 61.8% retracement of 1.1993 to 1.2331 at 1.2122) will indicate that rebound from 1.1993 has possible completed and save the case that recent choppy price actions could merely be part of a medium term triangle consolidation. And, down trend from 1.3283 should still resume after completing such consolidation in such case.

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