There were 2 positive US data points on Tuesday (6/24) on consumer confidence and the housing market. Let’s take a look at these fundamental releases and the subsequent reaction in the USD/JPY, EUR/USD, and the S&P500 index.
Conference Board’s Consumer Confidence is improving in June. It came in 85.2, up from May’s 82.2, which was revised down from 83.0. According to Forexfactory.com, Economists’ forecasts were around 83.6. As you can see from the historic chart below, consumer confidence has recovered to the highest level since January 2008 when it was 87.3. According to Lynn Franco, Director of Economic Indicators at the Conference Board, “June’s increase was driven primarily by improving current conditions, particularly consumers’ assessment of business conditions…the momentum going forward remains quite positive”. (Conference Board)
According to the US Census Bureau, New Home Sales (annualized) for May rose to an annualized rate of 504K, the highest reading since the March 2008 reading, when it was 575K after revision. April’s reading was revised down to 425K, from the original report of 433K. Economists’ forecasts for the May reading was around 442K. The increase in new home sales accompanies recent housing data that showed improving conditions for home sales such as increased inventory, and stabilizing of mortgage rates. (Census Bureau, pdf)
Reactions and Technical Developments:
The USD/JPY has been consolidating in June between 102.80 and 101.60. The price action, moving averages, and the RSI in the 1H chart reflect a directionless market trading in a triangle pattern during the month. We also see that it rallied after the positive US data, bringing the pair just under the triangle resistance line. A break above 102.20 would be a bullish signal that exposes the 102.80 high, especially if a subsequent pullback can be held above 102. Failure to cross 102.20 followed by a dip below 102 brings the bearish breakout scenario in play, with focus on the 101.60 June low, as well as the 100.75-90 lows on the year.
(usdjpy 1h chart, 6/24)
The EUR/USD broke a falling trendline from last week’s high, but was kept below the falling trendline from June’s high at 1.3676. The breakout was halted and reversed after the US data. Price has falling below 1.36 and invalidated the bullish breakout from earlier. Instead, price is threatening to break below last week’s rising trendline. EUR/USD is left at the crossroad, with a slight bullish bias from last week. However, without a break above 1.3630, the pair remains in bearish-neutral mode in a higher time frame ie. 4H chart.
(eurusd 1h chart, 6/24)
The S&P500 index made another historic high at 1967.5 last week, and is cracking that high today after the better-than-expected US data. The 1H chart shows a very bullish market, with bullish continuation in the cards. At this point, only a break below 1950, the 200-hour SMA, a rising trendline from May, and a RSI reading below 40, should open up any bearish outlook, which should be limited and assessed as a short-term correction against a persistent bullish trend since late 2008.
(s&p500 1h chart, 6/24)
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