**U.S. Dollar Gains Momentum After Strong Housing Data: In-Depth Analysis for EUR/USD, GBP/USD, USD/CAD, USD/JPY**
*By Vladimir Zernov, adapted and expanded for clarity and depth*
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The U.S. dollar swept higher in recent trading sessions as markets digested powerful economic data, particularly housing starts that outpaced expectations. This influx of positive sentiment solidified the greenback’s strength against major currency counterparts, inciting strong moves across EUR/USD, GBP/USD, USD/CAD, and USD/JPY. This article delves into the market reaction, the technical landscape, and the broader context shaping the Forex market, with in-depth chart analysis and outlooks on key currency pairs.
## U.S. Housing Starts Ignite Dollar Rally
Traders received a jolt after U.S. housing starts jumped to an annualized pace of 1.631 million in May, well above expectations of 1.37 million and the previous month’s 1.352 million. Accompanying this was a rise in building permits, which edged up to 1.386 million from April’s downwardly revised 1.352 million, posting a small beat over the market’s 1.383 million forecast.
Market reaction was swift:
– The dollar index (DXY) climbed as investors priced in continued economic resilience.
– Yields on U.S. Treasuries shifted higher, bolstering dollar-demand.
– Housing sector strength essentially challenged any premature dovish expectations surrounding the Federal Reserve.
The housing market has an outsized influence on U.S. economic sentiment. Robust construction activity suggests underlying consumer confidence and spending, encouraging investors to bet on lingering U.S. growth. For the Fed, upbeat housing data may be a reason to sustain higher rates for longer, diminishing hopes of imminent policy easing.
## Forex Market Reaction: Dollar Strength Reigns
With the U.S. dollar gathering steam, key major pairs experienced sharp moves:
– **EUR/USD** fell below the pivotal support at 1.0700.
– **GBP/USD** declined, slipping to weekly lows.
– **USD/CAD** surged as the loonie faltered amid lower oil prices.
– **USD/JPY** soared, brushing fresh multi-decade highs.
Let’s break down each pair’s performance and technical outlook.
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### EUR/USD: Sellers Dominate as Dollar Strengthens
**Overview:**
The euro has been under continuous pressure as the dollar is buoyed by robust U.S. economic data and safe-haven demand. Recent French election uncertainties have only compounded downside momentum for the euro.
**Key Drivers:**
– U.S. data surprises against expectations, highlighting policy divergence between the Fed and ECB.
– Ongoing political uncertainty in the Eurozone, especially in France, undermines confidence in the euro.
– European economic data remains tepid, with industrial production and inflation failing to impress.
**Technical Analysis:**
– EUR/USD broke decisively below the 1.0700 level, a crucial psychological and technical support.
– Momentum indicators such as the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) are both showing persistent bearish signals.
– The price is trading well below key moving averages, notably the 50- and 200-day SMA.
**Key Levels to Watch:**
– Immediate support lies at 1.0670, a region tested during prior selloffs.
– A sustained break here exposes the 1.0610-1.0620 zone.
– On the upside, first resistance stands at 1.0700, followed closely by 1.0760.
**Short-Term Outlook:**
Absent a reversal in U.S. data or a calming in Eurozone political tensions, the downside bias prevails in the near term. The pair would require a halt in dollar momentum or a significant shift in ECB guidance to recover convincingly.
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### GBP/USD: Sterling Surrenders Gains
Read more on GBP/USD trading.