Existing home sales increased modestly in February, but tepid inventory levels pushed price growth to its fastest pace in a year, according to the National Association of Realtors. This means the 36th consecutive month of annualized price gains and the largest ones since last February (8.8 percent). Vice Chairman Stanley Fischer at the Economic Club of New York said, "Although the recovery has been slow, there has been significant cumulative progress. Liftoff should occur when the expected return from raising the interest rate outweighs the expected costs of doing so. In deciding when that time has come, we will continue to monitor a wide range of information regarding labor market conditions, inflation, and financial and international developments. We anticipate that it will be appropriate to raise the target range when there has been further improvement in the labor market. We are reasonably confident that inflation will move back to our 2 percent objective over the medium term."
Upcoming economic data
CPI, Core CPI, Flash manufacturing PMI, and new home sales data are due. In November 2014, CPI data came out at 1.3% from there it was dropped to 0.5%. The sharp decline in oil prices effected the CPI readings. This time, we expected another decline. In case of positive readings, we can expect a huge bump in the USD-pegged prices. After the FOMC meeting, USD-related pairs were hammered. We advised before the meeting to close all the USD related pairs.
USD/CAD
Ahead of the US data, the US dollar is trading higher against the CAD. The pair has the nearest support at 1.2488 or 50Dsma. The pair prepared a strong support base between 1.2350 and 1.2300 at 200MSMA. Until prices close above 1.2300, buying on dips still remains in play. The weekly resistance is found at 1.2675 and intraday resistance seems at 1.2550. On the h1 chart, lower lows and lower highs are developing. We expect intraday strong reversal above 1.2550 towards 1.2610 and 1.2650. The near-term picture favors bears. We expect the price to correct towards 1.2400 or 1.2370. From there, the pair changes its direction. Until the price closes below 1.2680, selling on rise will be preferable. We are bullish on a longer term, but the near-term outlook favors mild correction.
USD/JPY
Ahead of the US data, the pair is trading in a muted mode. Intraday support is likely to be found at 119.50. Resistance is seen at 119.90 and 120.60. Parallel support is at 119.00 or 50DSMA. We recommend buying with SL at 118.90. This view is valid for this week. Bulls must close above 120.70 to take charge. Until then, the trading range pattern is framed between 118.90 and 120.70.
Key level for bulls to close above to take charge:
USD/CAD at 1.2675,
USD/JPY at 120.70, USD/CHF at 0.9900.