The 10 am EST release of the US existing home sales will kick off this weekâ€™s round of housing related figures, which will includes Tuesdayâ€™s release of the January home price index and Wednesdayâ€™s February new home sales. Existing home sales are expected to drop 0.5% to 4.85 mln in February as the monthâ€™s supply is expected to hit a new high at 10.5 from 10.3.
With financial markets shut in Europe, China and Hong Kong for Easter Monday Holiday, liquidity in the US session is expected to remain lower than normal and so is the fear element. But weaker than expected sales figure may trigger renewed erosion of risk appetite. Concerns with commercial finance company CIT seeking emergency funding and selling assets to remain in business have cropped up, with the implications for small business finance looking bleak.
Euro Awaits IFO Test
Last weekâ€™s euro tumble will be reassessed ahead of Wednesdayâ€™s key IFO survey on German business sentiment. The February climate index rose to a 3-month high of 104.1, posting its third consecutive monthly increase, while the situation index jumped to 110.3 from 107.9, regaining its November high. Just as the IFO surveyâ€™s strengthening has been persistently instrumental in boosting the euro to new highs, disappointing IFO releases have also proven to trigger sharp declines in the currency. Considering the euroâ€™s present shaky sentiment, a report below 104 may accelerate losses towards the key $1.5350 support, which is the 38% retracement of the rise from the Feb 8 low. A breach of 1.5350 is seen testing 1.5300, followed by 1.5280. Upside seen capped at 1.5460,with key resistance standing at 1.5520.
Yenâ€™s to Retain Strong Tone
After briefly breaching above the 100 yen level in thin trading, USDJPY drifts back to 99.60s. The currency may come under renewed pressure on improvement in risk appetite. The continued leadership vacuum at the Bank of Japan is giving way to speculation of a near-term rate cut. We do not expect a rate cut any time soon as the latest economic data do not warrant action that would erode the central bankâ€™s interest rate ammunition. No judgment on the latest liquidity situation in credit markets can be made until weâ€™re well into full functioning mode later in the week when traders return to their desks.
The 4-hour chart is testing the 5-day trend line at 99.50, which is sustained by the 99.20 low. Our medium and long term assessment remains for the pair to hover below the 99 figure and reach to as low as 95 towards the end of Q2.
Sterling to Stabilize for Now
Rightmoveâ€™s index on UK home prices slowed to 0.8% m/m from 3.2%, translating to an annual increase of 5.0% from 5.8%. The Financial Times reports that UK homeowners are increasingly facing problems in refinancing their mortgages. Last weekâ€™s damage in the British pound was fuelled by a combination of commodity-driven USD gains and deteriorating fundamentals in the UK , underlined by rising chances of a BoE rate cut next month.
Cable stands just above the 50-day MA of $1.9775, with upside remains limited at 1.9840. Any additional gains are seen capped at 1.9870. Support to emerge at 1.9780. Risk for prolonged selling below 1.9750 will depend on overall risk appetite and the state of equities later in the week.
EURGBP continues to stabilize at 0.7760, followed by the 0.7730 trend line support. Upside target stands at 0.7810