Title: U.S. Dollar Advances as New Home Sales Surpass Expectations: In-Depth Analysis on EUR/USD, GBP/USD, USD/CAD, and USD/JPY
Source: Original article by Vladimir Zernov, FX Empire
Link: [FX Empire](https://www.fxempire.com/forecasts/article/u-s-dollar-gains-ground-as-new-home-sales-beat-estimates-analysis-for-eur-usd-gbp-usd-usd-cad-usd-jpy-1543817)
The U.S. dollar witnessed a broad-based appreciation in the currency markets on the back of stronger-than-expected new home sales data. In a key economic release that exceeded market forecasts, May’s new home sales offered investors signs of resilience within the housing market, thus reinforcing confidence in the U.S. economy and pushing the greenback higher against major counterparts.
This article provides an in-depth technical and fundamental analysis of the major currency pairs including EUR/USD, GBP/USD, USD/CAD, and USD/JPY, leveraging the insights shared by FX Empire’s Vladimir Zernov and incorporating updated market context from additional financial sources.
U.S. New Home Sales Beats Expectations
The U.S. Census Bureau released May 2024 new home sales data that surpassed economists’ forecasts. According to the report:
– New home sales rose to a seasonally adjusted annual rate of 763,000 units, compared to the expected 675,000.
– This marks a significant increase from April’s downwardly revised 680,000 figure.
– On a year-over-year basis, sales were up by over 14 percent.
– Median home prices dropped slightly, providing a measure of affordability that likely supported the surge in demand.
This surprise in housing data added fuel to expectations that the Federal Reserve may delay interest rate cuts, as housing strength reflects continued economic resilience despite tighter monetary policy.
DXY Index Reaction and Broader Dollar Strength
Following the robust housing data, the U.S. Dollar Index (DXY), which tracks the greenback’s value against a basket of six major currencies, climbed above the 106.20 level, sustaining upward momentum throughout the trading session.
Key drivers behind the dollar’s advance:
– Economic strength: The housing sector’s performance coupled with steady unemployment data indicates continued economic stability.
– Fed stance: With inflation still elevated and economic data suggesting robustness, markets are paring back expectations for aggressive Fed rate cuts in 2024.
– Risk sentiment: Renewed geopolitical uncertainties and global economic concerns have prompted traders to seek the safety of the dollar.
Let’s examine how the dollar’s strength manifested in its performance against major currency pairs.
EUR/USD Technical and Fundamental Analysis
The euro came under pressure as the dollar gained traction. As of the last available data:
– EUR/USD dropped below the 1.0700 level, extending losses after the home sales report.
– The currency pair posted a reversal from the recent rebound off the 1.0670 support zone.
Key Considerations:
– Technical resistance stands near the 1.0725–1.0740 zone. This acted as previous support and now presents a challenge for bullish attempts.
– The medium-term downtrend remains intact, as the pair continues trading below both the 50-day and 200-day moving averages.
– The euro is weighed down by diverging monetary policy prospects between the ECB and the Fed. While the Fed is less inclined to cut rates due to persistent inflation, the ECB has already signaled a gradual easing path.
Outlook:
If the euro continues to trade below its key resistance, it may retest the March lows near 1.0630 in coming sessions. However, any pullback in U.S. data or dovish Fed commentary could provide temporary euro support.
GBP/USD Facing Resistance
The British pound followed a similar trajectory to the euro, pressured by dollar strength and mixed domestic economic signals. GBP/USD moved below the psychologically significant 1.2700 level, losing momentum after testing
Read more on USD/CAD trading.