Investing.com -- EUR/USD fell to fresh 1-month lows on Tuesday, as vigorous new home data in the U.S. augmented the dollar raising the likelihood that the Federal Reserve could approve its first interest rate hike of the year at its next meeting in mid-June.
The currency pair traded in a tight range between 1.1139 and 1.1226, before settling at 1.1141, down 0.70% for the session. With the sharp losses, the euro closed below 1.12 against the dollar for the first time in May. For the month as a whole, the euro has only recorded four winning sessions in 19 trading days. Since hitting nine-months in early-May, EUR/USD has fallen considerably by nearly 3%.
EUR/USD likely gained support at 1.1055, the low from March 15 and was met with resistance at 1.1434, the high from May 12.
The dollar extended gains after the U.S. Commerce Department said on Tuesday morning that new home sales in April soared 16.6% to a seasonally adjusted annual rate of 619,000, the highest monthly gain in nearly 25 years. With the sharp gains, new home sales surged to their highest level since January, 2008, topping the next closest reading by more than 70,000. Analysts expected to see slight gains of 12,000 to 523,000 after March's subdued reading. The stellar figures are a positive sign for economists ahead of a bevy of monthly reports set to be released later this week. On Wednesday, the Federal House Finance Agency (FHFA) is expected to report a 0.5% gain in home prices for single-family housing for the month of March. It comes after the FHFA's House Price Index only rose by 5.6% on an annual basis a month earlier. Economists typically keep a close eye on home appreciation in low-inflation environments such as the one the U.S. economy is currently experiencing. At week's end, analysts will receive updates on second quarter GDP and the May final reading of consumer sentiment from the University of Michigan.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, rose more than 0.35% to an intraday high of 95.61, hitting its highest level in two months. The index, which stood at 95.59 at Tuesday's close, is still down by more than 4% since early-December.
The unexpected surge in new home prices could also appease the hawks at the Federal Reserve, who have sent strong indications that they will support a June interest rate hike if the incoming data confirms their views of a broadly improving economy. On Monday, St. Louis Fed president James Bullard indicated that he favored a long-term strategy of gradual rate increases opposed to no rate hikes at all, as tight labor markets exert "upward pressure on inflation." Separately, San Francisco Fed president John Williams said in an appearance in New York that he could see the Fed raising rates two to three times this year, followed by three to four times in 2017. Fed chair Janet Yellen will conclude the week with a speech on Friday at Harvard University.
In England, the British pound ticked up against the doll after the Telegraph's latest ORB poll found that a "Remain" vote has a 13-point lead over a campaign to "Leave," ahead of next month's controversial referendum on the U.K.'s membership in the EU. Among likely voters, approximately 55% supported a vote to stay, while support for a departure rose by three points to 42%.
Yields on the U.S. 10-Year rose three basis points to 1.86%, while yields on the Germany 10-Year were flat at 0.18%. At session-highs, yields on 10-year U.S. Treasuries remained near their highest levels in three weeks.