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Despite weak fundamental data on the US economy and statements made by the Chairman of the Federal Reserve, the US dollar strengthened against the euro and the pound. This happened against the background of profit taking in risky assets by large players when speculative traders sold the dollar on weak news, institutional players fixed profits from the recent upward trend in the euro and the pound.
According to a report by the US Department of Commerce, sales of new homes in the US fell sharply in May, which is a very serious "call" that the situation in the housing market continues to deteriorate and occupy an increasingly unstable position.
According to the data, sales of homes in May fell by 7.8% and amounted to 626,000 homes a year. Economists had expected sales to be 683,000. The average price of a new home in May was $308,000. Despite the fact that the data on sales in the housing market is volatile, the situation in the real estate market is gradually becoming unpleasant. Data for April was revised with a slight increase to 679,000 homes a year, while the May data was revised down to 705,000 homes per year.
The rise in house prices in the US in April also continued to slow down due to lower demand. Also, consumers are not in a hurry with new purchases and expect lower interest rates, which will make cheaper borrowing.
According to the data, the average price of a house in the main megacities of the country increased by 3.5% after an increase of 3.7% in March this year.
US consumer confidence continues to decline, which is a very bad sign. First of all, consumer expectations regarding the economy deteriorated, and this happened due to the gap in trade relations between Washington and Beijing.
According to the Conference Board, the consumer confidence index in June this year fell to 121.5 points against 131.3 points in May. Economists had expected the index to be 131 in June.
Yesterday afternoon, all attention was focused on the speech of Federal Reserve Chairman Jerome Powell. Overall, Powell said everything that the market had been waiting for.
The Fed Chairman noted that he was studying the need to lower interest rates, as trade conflicts and concerns about global economic growth came to the fore, increasing uncertainty. Powell also drew attention to the need to monitor economic data more closely and act appropriately to support economic growth.
Despite this, the head of the Fed is confident that monetary policy should not overreact to short-term changes in sentiment, as the basic forecast remains favorable even despite the prospects that have changed since the beginning of May, when the Fed has not yet seen serious reasons for lowering interest rates.
All this suggests once again that the next series of important economic data will shed light on the further actions of the Fed, and that the market reaction will depend directly on the reports on the US economy. Taking into account the fact that no positive changes are foreseen, the trend towards the weakening of the American dollar will most likely continue.
As for the technical picture of the EURUSD pair, the further short-term downward correction will tend to the levels of 1.1320 and 1.1280, where larger buyers will declare themselves in the market. Without a good decline in the euro, it is unlikely to get a major continuation of the upward trend in the area of highs 1.1430 and 1.1500.
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