U.S. Housing Report Helps Euro Extend Earlier Gains

Despite questions about how the European bank stress testswere conducted, investors seemed satisfied enough with the results early thismorning to underpin the Euro while waiting for fresh news regarding the U.S. housingmarket.

Despite questions about how the European bank stress testswere conducted, investors seemed satisfied enough with the results early thismorning to underpin the Euro while waiting for fresh news regarding the U.S. housingmarket.

Following the release of U.S. new home sales data which sawan increase in June by more than economists had forecast, the Euro rallied andis now pressing a minor .618 retracement level at 1.2998. This puts this pairin a position to challenge last week’s high at 1.3028.

Stocks extended their gains following the housing report,driving up demand for higher risk assets, helping the Euro maintain the upwardmomentum which helped drive the market higher late last week.

The British Pound is higher this morning but momentum slowedwhen the market neared a weekly swing top at 1.5523. A breakout over this levelwill turn the main trend up and set up a possible acceleration to a major 50%retracement level at 1.5635.

Fundamentally the Sterlingis being driven higher by last week’s release of better than expected secondquarter GDP. Last week’s news that the U.K. economy expanded by a strong1.1 percent was a sign the economy was more stable than previously estimated.This news led some investors to believe that the Bank of England will have toseriously consider raising its benchmark interest rate sooner than expected.

As the Pound approaches a key retracement level at 1.5635,investors have to realize that the second quarter expansion took place beforethe government implemented its proposed deep spending cuts and tax hikes. Thebiggest fear amongst bullish traders is that the government’s proposedausterity measures will curtail the gains that the economy is currentlyshowing.

James A. Hyerczyk has been actively involved in the futures markets since 1982. He has worked in various capacities within the futures industry from technical analyst to commodity trading advisor. Using W. D. Gann Theory as his core methodology, Mr. Hyerczyk incorporates combinations of pattern, price and time to develop his daily, weekly and monthly analysis. His firm, J.A.H. Research and Trading publishes The Forex Pattern Price Time Report... More

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