Research and news analisis

US June construction data disappoints - ING

Teunis Brosens from ING suggests that today's weaker than expected US housing numbers suggests construction is stagnant at best.

Teunis Brosens from ING suggests that today's weaker than expected US housing numbers suggests construction is stagnant at best.

Key quotes

"The weakness of June construction figures has not prevented homebuilders from turning increasingly bullish."

"In yesterday’s NAHB homebuilder sentiment survey, builders reported increasing numbers of sales and prospective buyers, although both sub-indices remain lower than a year ago."

"Homebuilders are also becoming more optimistic about the outlook for the coming months. The question remains what their optimism is based on."

"Mortgage applications for house purchases, that provide an early yet volatile indication of housing demand, have been moving sideways for most of this year, and are not showing any signs of a pickup."

"The next big event for the housing market is going to be the Fed exit strategy, with details possibly announced at September’s FOMC."

"Mortgage rates reacted strongly after Bernanke’s initial tapering comments last year, it might be wise to now brace for the Yellen-effect."

GBP/USD struggling around 1.7100

The GBP/USD has extended its decline below the 1.7100 psychological level at the beginning of the American session as the USD benefits from decline in risk appetite.

The GBP/USD has extended its decline below the 1.7100 psychological level at the beginning of the American session as the USD benefits from decline in risk appetite.

The GBP/USD dipped to a low of 1.7093 but bears lacked determination to take the GBP lower. A series of mixed US data barely affected the pair that continued to hover around 1.7100. At time of writing, the GBP/USD is trading at 1.7105, 0.17% below its opening price.

US housing starts fell 9.3% in June, while consensus was looking for a small uptick. Meanwhile, initial jobless claims dropped to 302K last week, beating the 310K expected.

GBP/USD levels to watch

In terms of technical levels,on the downside next supports could be found at 1.7073 (23.6% Fibo of 1.6692-1.7190) and 1.7058 (Jul 15 low). On the flip side, resistances are seen at 1.7190 (2014 high Jul 15) and 1.7200 (psychological level).

USD/CAD deflates below 1.0740

The Canadian dollar is recovering some ground lost at the moment, dragging the USD/CAD back below the 1.0740 level...

The Canadian dollar is recovering some ground lost at the moment, dragging the USD/CAD back below the 1.0740 level.

USD/CAD softer post-US data

The better figures from the US labour market - with claims decreasing to 302K in the week ending on July 11th – were eclipsed by the weaker tone from the housing sector, dragging spot back to the area of 1.0740/35. In the opinion of Camilla Sutton, Chief FX Strategist at Scotiabank, “Wednesday’s Bank of Canada events have weighed on policy expectations, lowering domestic interest rates while narrowing the US-CA 2Y spread to its lowest level since late 2011 – a level that would typically be associated with much higher levels in USDCAD”.

USD/CAD relevant levels

At the moment the pair is down 0.05% at 1.0735 with the initial support at 1.0710 (low Jul.14) followed by 1.0630 (low Jul.11) and then 1.06720 (low Jul.3). On the upside, a break above 1.0813 (200-d MA) would target 1.0814 (low May 8) en route 1.0831 (61.8% of 1.0962-1.0620).

EUR/USD finds support at 1.3520

The EUR/USD reacted to the upside following the better than expected jobless claims in US as the pair is trading slightly bullish at 1.3530 after supporting the 1.3520.

The EUR/USD reacted to the upside following the better than expected jobless claims in US as the pair is trading slightly bullish at 1.3530 after supporting the 1.3520.

Earlier in the day, the EUR/USD peaked to 1.3540 where the pair found selling interest and it was launched down to test the 1.3520. Currently, EUR/USD is trading at 1.3531, up 0.04% on the day, having posted a daily high at 1.3541 and low at 1.3521.

EUR/USD spot is in neutral territory according to the hourly FXStreet OB/OS Index, while the FXStreet Trend Index is strongly bearish.

EUR/USD sentiment

"EUR/USD is seeing some light short-covering, now at 1.3530. A sustained move through 1.3540 is needed to make the weak shorts sweat," comments Jamie Coleman from FXBeat. "A move above 1.3580 is needed to make them puke."

To the upside, resistances are seen at 1.3540, 1.3560 and 1.3570. Supports are at 1.3520, 1.3500 and 1.3510.

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