Daily Report: Markets in Consolidation, Focus on US Home Sales
ActionForex | Dec 22, 2008 07:00PM ET
Pre-holiday trading continues to be quiet today. Dollar index continues to stay in tight range below 81.62 as consolidation continues. Focus will turn to another round of home sales data from US today which is expected to show further deterioration in the housing sector. November existing home sales are anticipated to dropped -1% to 4.93M units from 4.98M units in October, while new home sales probably declines -3.6% to 415K in November from 433K in October. Although the 30-year fixed mortgage has been dropped -100 bps, it failed to stimulate purchase. October housing prices should have dropped another -1.3% mom.
The final readings for Q3 GDP and personal consumption are expected to be -0.5% and -3.7% respectively, same as preliminarily reported. The final December reading for the University of Michigan index of consumer sentiment likely dropped to 58.6 from 59.1 initially estimated. The gauge should have increased from 55.3 in November as decline in gasoline prices and lower mortgage rates were expected to improve personal finance and helped sentiment.
In European session, Eurozone will report current account in October after recording a deficit of 6B euro in September. In the UK, current account for Q3 is expected to be in a deficit of -11.9B pound and the finalized Q3 GDP is expected to remain at -0.5% qoq. However, there's chance for downward revisions as the business investment data released last week was below expectation.
Released overnight, New Zealand's GDP in Q3 declined 0.4% (consensus: -0.5%) from -0.2% in Q2. Household spending which contributed 60% of the nation's economy, dropped to the lowest level in 21 years. This is the third consecutive quarter of economic contraction and should probably increase the prospect for another rate cut in January.
Technically speaking, overall outlook remains unchanged. Dollar index is still expect to climb further as long as 79.43 minor support holds and should channel 83.11 cluster resistance (50% retracement of 88.46 to 77.69 at 83.07). One point to note is that EUR/CHF dips further to 1.5199 and is closer to mentioned 1.5163 support. Break of this support will confirm that rebound from 1.4315 has completed at 1.5880 after touching an important fibo resistance level and will trigger switch in balance of strength in Euro and Swissy.
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