USD Jumps on Declining Home Sales, As Mortgage Rates Surge

The USD has shown some weakness during this week after Christmas. The volatility is low for sure, but it shows that the market is leaning slightly against the USD, following the slowdown in rate hikes from the FED and the softer rhetoric. But nothing is for certain when they will stop and other major central banks are slowing as well, which gave the USD a slight boost ahead of Christmas.

But, now we see that the market has turned dovish again, although the moves have been choppy and there hasn’t been a clear direction, since the USD selloff is being bought sharply, as we have seen in the last two days. Yesterday we saw a sharp reversal in EUR/USD after this pair was bullish earlier and today a similar scenario took place as the US pending home sales report was released.

US November 2022 Pending Home Sales

• Pending home sales for November 2022 -4% versus -0.8% expected
• Prior report. Fell -4.6% last month (was expecting at -5.0% decline)
• Pending home sales index 73.9 vs 77.0 last month (revised from 77.1)
• Pending home sales -37.8% from November 2021

The pending home sales index is near/below the 2010 low at 75.7. The post pandemic low from April 2009 reached 69.0. At 73.9 that level is in danger of being reached. The housing market has been directly impacted by the FED’s policy in 2022 which pushed up mortgage interest rates. The thirty-year mortgage rate has soared from 3.11% to 7.08% in 2022. The current rate is near 6.27%. We decided to open a buy EUR/USD signal at the 200 SMA (purple) which is acting as support again as shown in the chart above, after a 60-pip decline. GBP/USD also turned bearish and the decline here was even bigger at around 100 pips.

Looking at the districts:

• Northeast is down -7.9%
• South is down -2.3%
• Midwest is down -6.6%
• West is down -0.9%

EUR/USD