Forex - Dollar falls on weak housing data

The dollar fell against the Euro, British Pound, Swiss Franc and Japanese Yen yesterday after the pending home sales index dropped 12.2% to 89.9 in July, the weakest level since September 2001. This further extended the concern that the housing market could still have a real effect on the real economy in the short and medium terms.

Private sector jobs also slowed +38,000 in August which sent US stock indexes lower. The dollar was unchanged after the release of the Fed Beige Book which indicated tighter credit will further hurt the housing market.

Gold has been a superb performer for the past two weeks, rising almost every day. Fundamentally, this tells us that the dollar is still weak and investors are flocking to a safe-haven. Technically, there are two scenarios to observe very carefully: i. Gold hitting a short-term double top between $688 and $695. ii. The break-out of the major triangle formation, and confirmed by a break through $695 will causing Gold shooting upwards toward $730 for a long term double top. Should things pick up for the dollar and investors move into riskier assets, Gold may fold very heavily. Look out for this one, because it’s going to move fast.

EurUsd Moving up, there will be heavy resistance at 1.3694 and 1.3735, the 78.6 Fibonacci retracement. On the downside, a slide back to 1.3550 is eyed below which the target would be the 1.3375 support.

GbpUsd may aim for the 2.0270, the 61.8% Fibonacci level. On the downside, strong support holds at 2.0040, a trend line the pair stays above of during the past 10 days.

UsdJpy floating around 115.50, finding some support. On the upside, there is no resistance until 117.60. On the downside, 113.88 is a strong support level, which if broken, will eye August 17th’s low of 111.60.

UsdChf keeping steady above 1.2032 with 1.2156 target at the trend line. On the downside, supports are found at 1.1962, 1.1882 and the trend line support of 1.1815.