EUR/USD neutralized losses, traded up to session highs after disappointing US new home sales data

The euro managed to vanquish the earlier losses and climbed to session highs against the US dollar, following the release of downbeat new home sales report out of the United States.

Having fallen to a session low at 1.3334 earlier in the day, EUR/USD rose sharply to its highest point on Friday at 1.3406 at 14:42 GMT. Support for the cross was likely to be received at August 22nd low, 1.3298, while resistance was to be seen at August 21st high, 1.3427.

Minutes ago it became clear that new home sales in the United States decreased significantly to their lowest level in the past nine months in July, giving boost to concerns that rising mortgage rates may obstruct US housing market recovery. Sales of new homes tumbled by 13.4% to reach annual 394 000 units in July compared to June. The recorded drop was the strongest in three years, as sales hit their lowest point since October 2012. Experts had anticipated that new home sales will reach 490 000 units. Junes figure was revised down to 455 000 from 497 000 units previously.

Additionally, on Thursday the Department of Labor in the United States reported that initial jobless claims rose by 13 000 to 336 000 during the week ending on August 17th 2013, as experts had anticipated a lesser increase in the number of claims, to 330 000.

These data points put a break to greenbacks advance, started on Wednesday, when the minutes of Federal Reserve’s most recent meeting showed that policymakers were “broadly comfortable” with Chairman Ben Bernanke’s time frame to begin asset purchase tapering this year, if the economy improves, with a few officials saying a reduction might be necessary soon. However, policymakers remain divided over the timing of possible reduction of scale, as almost all of the committee members agreed that a change in the course of Feds stimulus program was not yet appropriate.

Meanwhile, in the Euro zone, the Economic Sentiment Indicator (ESI) showed improvement in its value to -15.6 in the month of August, outperforming preliminary estimates of a lesser increase to -16.5, after in July the index stood at -17.4.

Elsewhere, the common currency was gaining against the sterling, as EUR/GBP cross added 0.33% on a daily basis to trade at 0.8598 at 14:52 GMT. EUR/JPY pair was also on positive territory, increasing by 0.14% to trade at 132.04 at 14:53 GMT.