EZ Data Firm But Euro Stalls

The euro for its part, failed to make new highs, wandering aimlessly between 1.2430-1.2400 for most of the night. As we noted yesterday, "the (EUR?USD) pair appears tired and ready for some retracement, especially in the face of massive long term resistance at the 1.2450- 1.2550 zone."

Yesterday, the market was gripped in the battle of dueling good news reports, as the positive IFO data went head to head against the better than expected US Existing Home Sales and very strong US Consumer Confidence results. Today, attention will be focused on the US Durable Goods numbers and the Fed Beige Book. With Fed policy now highly data dependent, the Beige Book conclusions may foreshadow the outcome of the next FOMC meeting. However, with housing data, becoming the primary driver of Fed rate decisions, today's New Home Sales figures may have a very powerful impact on dealing as well. The market is looking for a modest rise to 1106K units from 1080K the month prior. If the data prints in line, it will provide temporary relief to worries that the housing bubble has popped and could push the EUR/USD below the 1.2400 figure. However, if New Home Sales once again report below expectation, and moreover, print below the psychologically important 1M mark, all bets for a dollar bounce are off. Because of the differences in the booking of closings, New Home Sales data is considered to be a much better gauge of current housing activity than Existing Home numbers. Therefore, a marked decline in this key report will likely create further weakness in the dollar, as the markets will begin to fear and start to price the coming onset of housing based recession.