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FOREX Watch: US housing starts hit 10-month lows

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FOREX Watch: US housing starts hit 10-month lows

The US dollar opened the week entrenched in negative territory following multiple days of testimony from US Federal Reserve Chairman Ben Bernanke. In a series of prepared statements in front of the House Financial Services Committee, Bernanke avoided giving precise details about when the Fed would begin tapering its monthly bond buying program, stressing that quantitative easing wasn’t on a preset course.

The dollar’s woes extended into Monday’s New York session following the release of housing data. Existing home sales suddenly declined in June, according to a report by the National Association of Realtors. Month-over-month sales dropped 1.2 percent after skyrocketing 3.4 percent the previous month. The housing market is a sensitive factor to the US economy, with low readings often generating heavy volatility for US dollar pairs.

The declines have been largely attributed to bad weather, with many parts of the country experiencing heavy doses of rain and other volatile weather conditions this past month. Despite the decline, June sales remain the second highest since November 2009. US home builder confidence has also reached its highest level in more than seven years, signalling upbeat conditions in the US housing market for the foreseeable future.

The market’s knee-jerk reaction immediately weighed on the US dollar. The dollar index declined half a percent to close the New York session at 82.20. The USDJPY declined more than 0.40 percent to close below the psychological 100-level. The North American pair also declined sharply, sending USDCAD to 1.0330 (-0.30 percent).

In Europe, the British pound extended its bullish streak, advancing 96 pips to close at 1.5357. The EURUSD also took advantage of the dollar’s broad weakness, advancing 1.3187 (+0.37 percent), despite an idle calendar.

On Wednesday the US Census Bureau will release official figures on new home sales. June’s figures are still expected to top the previous month, but Monday’s disappointing reading may have shifted the consensus’ expectations.

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