Forex - EUR/USD gains on soft U.S. housing data

Disappointing data on new U.S. home sales sent the dollar weakening against the euro on Friday by keeping expectations alive by many that monetary policy in the U.S. will remain ultra-loose for the foreseeable future.

In U.S. trading on Friday, EUR/USD was up 0.32% at 1.3398, up from a session low of 1.3334 and off from a high of 1.3410.

The pair was likely to find support at 1.3298, Thursday's low, and resistance at 1.3452, Tuesday's high.

The Commerce Department reported earlier that new home sales in the U.S. dropped 13.4% to 394,000 units in July, far worse than market expectations for a 1.4% decline. 

In June, new home sales rose 3.6% to 455,000 units. 

The numbers kept expectations going that while the Federal Reserve remains ready to begin scaling back the pace of its USD85 billion in monthly asset purchases this year, a start date may come later such as in December as opposed to September.

Stimulus tools such as monthly bond purchases drive down interest rates to spur recovery, weakening the dollar in the process.

Fed officials have said they will pay close attention to economic indicators before deciding when to taper stimulus programs.

On Thursday, the Department of Labor reported the number of people filing for initial jobless claims last week rose by 13,000 to 336,000, a little higher than forecasts for 330,000, which helped soften the dollar in quiet trading.

Meanwhile in Europe, Germany's gross domestic product grew 0.7% in the second quarter from the first, in line with market expectations.

The euro, meanwhile, was up against the pound and up against the yen, with EUR/GBP trading up 0.34% at 0.8597 and EUR/JPY trading up 0.18% at 132.05.

Official data revealed that the U.K. gross domestic product grew by 0.7% in the second quarter from the first, beating expectations for a 0.6% expansion.

The U.K. Office for National Statistics said in a preliminary report earlier that business investment rose 0.9% in the second quarter, surpassing expectations for a 0.6% increase after a 1.9% contraction in the first quarter. 

Data also showed that mortgage approvals in the U.K. rose by GBP37,200 in July after a GBP37,300 increase in June. Analysts had expected mortgage approvals to rise by GBP38,800 last month.