THE TAKEAWAY: Dollar Index drops to its lowest level since June 27 > US Existing Home Sales (MoM) (JUN) deflate in June—misses expectations

The USD is decisively lower after a large miss in US Existing Home Sales data: -1.2% m/m June actual; +1.5% Bloomberg News survey expected; +3.4% prior. Housing data has been optimistic in recent months so this contraction in sales may surprise some investors. However the USD was trading lower for much of the day, even before housing data was released. The Dow Jones FXCM Dollar Index (Ticker: USDOLLAR) falls -57 (-0.52%) to $10766 at the time of writing.

Global markets are trading mixed. 1-week volatility in FX markets sharply declines. On the flip side, the implied volatility in equities, measured by the CBOE Volatility Index (VIX), is higher by +2.71% to 12.88 at the time of writing.

While the VIX is higher from its admittedly suppressed levels, equities are trading bullishly across the world: S&P +0.21%; Euro Stoxx +0.33%; FTSE -0.12%; Nikkei +0.47%; Hang Seng +0.25%; Bovespa +1.11%; Sensex +0.05%; Shanghai Composite +0.61% at the time of writing. Emerging markets, led by Brazil and China, seem to be performing well today.

In the government bond market, the spread between 10YR Spanish and German bonds has tightened by -6.0bps to 4.596% at the time of writing. Eurozone peripheral debt is fact performing very strongly today. 10YR government bond yields trade as follows: US -0.7bps (-0.28%) to 2.477%; Germany -0.3bps (-0.19%) to 1.515%; Italy -7.8bps (-1.77%) to 4.322%; Spain -6.6bps (-1.41%) to 4.595%; Portugal -43.1bps (-6.51%) to 6.187% at the time of writing. Portuguese debt has performed extremely well as of late– yields are down from 7.646% on July 12.

Lastly in commodities, crude oil is lower as Brent resumes its premium over WTI: WTI -0.84%; Brent -0.38%; LME Copper +0.14%; COMEX Copper +1.78%; Shanghai Copper +0.48% at the time of writing.

AUDUSD 15-minute Chart: July 22, 2013
Charts Created using Marketscope – prepared by Kevin Jin

The AUDUSD is rebounding nicely, up +0.92% on the day at the time of writing. The pair has traded stronger throughout the entirety of the day, with a -40 pip correction well in Asian trading. AUDUSD is now at its highest levels since July 17.

GBPUSD 15-minute Chart: July 22, 2013
Charts Created using Marketscope – prepared by Kevin Jin

The GBPUSD extends its fifth day of gains, surging past $1.5300 early in London trading. The pair is net +0.64% at the time of writing, exhibiting muted downward pressure throughout trading. The cable is also at its highest level since June 26.

EURUSD 15-minute Chart: July 22, 2013
Charts Created using Marketscope – prepared by Kevin Jin

The EURUSD is modestly +0.39% higher, tagging $1.3200 around 14:00 GMT (10:00 EDT on chart above) after the miss in US housing data. While the EUR is outperforming the USD today, the EUR is still lagging against most of the other major currencies.

USDJPY 15-minute Chart: July 22, 2013
Charts Created using Marketscope – prepared by Kevin Jin

The yen is the strongest major currency today, gaining +1.05% relative to the USD at the time of writing. The pair quickly dropped below ¥100.00 early into Asian trading and was never able to reclaim that level. After consolidating for much of the day thereafter, the pair continued further declines shortly after New York Open.

— Written by Kevin Jin, DailyFX Research

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