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GBPUSD Extends Tuesday’s Advance Ahead of the U.S. Existing Home Sales Report
Written by article default Thursday, 23 September 2010 05:53
Fundamental OutlookExisting home sales in the world’s largest economy is forecasted to rise 7.1 percent in August after plunging 27.2 percent the previous month, which will mark the highest level since April of this year. Last month, all four regions (Northwest, Midwest, South, West) posted a decline in home sales as the homebuyer tax credit came to an end and skewed the report. However, despite the impact of the tax credit last month, home sales are barely off of its dip despite the record low interest rates. Indeed, consumers are afraid to purchase a home in spite of the low housing prices as uncertainties in the U.S. remains. Meanwhile, the unemployment rate stands at 9.6 percent, which is the highest level since May as companies remain reluctant to add payrolls. Not to overlook, credit conditions remain tight and the recent dovish statements by the Fed suggests that the economy faces further headwinds ahead.
What does this mean? Existing home sales are expected to rise 7.1 percent in August, and though a reading in line or exceeding expectations would do very little for the U.S. dollar, it is a step in the right direction. This would be a mere step and not a leap due to the fact that the job market will need to recover substantially in order for the economy to convalesce. However a disappointing reading will add further weight onto the single currency. All in all, a poor existing home reading may validate further GBPUSD gains, while a reading better than forecasts may lead the pair to test the 50-day SMA for support.
Technical Outlook
GBP/USD
Source: FXCM’s Strategy Trader- prepared by Michael Wright
GBP/USD: The pair has extended yesterday advance to reach an intraday high of 1.5714. Indeed, there is still upside potential for the pair as price action recently broke above its narrow range, while my user defined parabolic SAR crossover signaled for additional gains a couple of days ago. It is noteworthy that there is major support at the 20-day moving average.
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