Consumer Confidence Stalls USD Gains

By IBTimes Staff Reporter | January 26 2010 3:14 PM

The dollar climbed higher against the majors with the exception of the yen, advancing to 1.0692 against the Canadian dollar and 1.4043 versus the euro. US equity bourses halted early morning losses after a report revealed better than expected consumer confidence, pushing the Dow Jones, S&P 500 and the Nasdaq back into positive territory. Spot gold and crude oil also tempered overnight losses following the upbeat confidence survey, edging back up toward the $75-level and $1,100-mark, respectively.

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The November Case-Shiller home prices improve to -5.32% from -7.27% a year earlier and increase by 0.24% versus 0.26% in the previous month. The Conference Board's consumer confidence survey outpaced consensus estimates for an improvement to 53.5 in January from 53.6 a month earlier, instead climbing to 55.9, and its highest level in 16-months. The November home price index increased to 0.7% from 0.4% in October.

In the coming session, traders will look ahead to December new home sales and the FOMC monetary policy decision. New home sales for December are estimated to increase by 3.1% compared with a decline of 11.3% in the previous month at 366k units.

The Federal Reserve is expected to leave monetary policy unchanged when it announces the results at 2:15 PM tomorrow. The FOMC is largely estimated to leave policy unchanged, keeping interest rates at 0-0.25%. The subsequent policy statement will be closely analyzed for any changes to the wording of the statement. With Fed funds futures not expecting a shift in policy until November, the FOMC will likely reiterate its current stance to leave interest rates at exceptionally low levels for an extended period of time.

Euro Slumps

The euro retreated beneath the 1.41-level to 1.4043 amid a shift to risk-averse assets. Economic data released from the Eurozone overnight saw Germany's January Ifo business climate index improve to 95.8 from 94.6 and the current assessment indicator edge up to 91.2 versus 90.4 previously. The expectations component jumped to 100.6, up from 98.9 in December.

EURUSD holds steady around 1.4080 with support seen at 1.4050, followed by 1.4020 and 1.40. Additional floors will emerge at 1.3970, backed by 1.3940 and 1.39. On the upside, resistance is eyed at 1.41, followed by 1.4140 and 1.4180. Subsequent ceilings are eyed at 1.42, followed by 1.4230 and 1.4265.