Housing stats of utmost importance on Monday

Today lacks any major economic data releases, save for some US housing stats.

"US housing market data has taken on increased market significance in recent months, not only  as a bellweather of the health of the US economy, but as a key factor in the Fed’s decision on its timing of QE tapering. US 30 year mortgage rates have risen sharply since May, when the Fed first talked about tapering. We would expect any significant disappointment in housing data to be positive for treasury markets and negative for the USD," says a morning note from Lloyds Bank Research.

Regarding the data, Barclays analyst Yuki Sakasai says, "we look for existing home sales of 5.28m (consensus: 5.25m) on Monday and new home sales of 478K (consensus: 485K) on Wednesday."

Lloyds say:

"Data out today will likely show that June US existing home sales rose to their highest level since the financial crisis as the housing market shows further signs of recovery. We forecast that existing home sale rose to 5.25mn saar in June compared with 5.18mn saar in May, their highest level since May 2007 and the first time sales have been consecutively above 5mn since the recession."

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Barclays backing the US dollar into year end

Yuki Sakasai at Barclays believes all-round US strength will be the key theme on FX markets for the remainder of 2013:

"We think that the modest pickup in cyclical activity and inflation and steady improvement in labor market conditions will be sufficient for the Fed to start tapering its asset purchases and expect the USD bullish trend to gather momentum into year-end as the contrast in monetary policy stance between the Fed and the rest of the world becomes even clearer. We would use any pullback in USD as an opportunity to enter structural long USD positions."

Also backing the US dollar today is Dieter Merz at MIG Bank:

"We continue to expect a medium-term stronger USD, therefore, the induced short-term volatility caused by elevated long USD positions is likely to stay, especially with a tapering schedule which remains uncertain."

We note that the latest data from the CFTC points to extended US dollar long positions. The USD long positions were close to its highest on 9 July, with all major
currencies being short compared to the US dollar.

This partly explains the sharp decline in the US dollar index following Mr Bernanke's dovish comments on 10 July.