Title: U.S. Dollar Strengthens as Housing Starts Exceed Estimates: In-Depth Analysis for EUR/USD, GBP/USD, USD/CAD, and USD/JPY
Original article by Vladimir Zernov, FXEmpire. Expanded and rewritten with additional data and context.
The U.S. dollar exhibited notable strength on June 18, 2024, as fresh economic data showed that U.S. housing starts significantly outperformed market expectations. This positive economic indicator provided a boost to investor confidence in the U.S. economy, reinforcing the outlook for the Federal Reserve’s monetary policy path and driving increased demand for the dollar across major forex pairs.
According to the U.S. Census Bureau and the Department of Housing and Urban Development, housing starts in May came in at 1.63 million (seasonally adjusted annual rate), which far exceeded the market expectation of 1.38 million. Building permits, a forward-looking metric, were 1.68 million, surpassing the expected 1.45 million. This robust performance in the housing sector has added weight to the argument that the U.S. economy remains resilient despite elevated interest rates.
Key Takeaways:
– U.S. housing starts rose to 1.63 million in May, beating expectations.
– Building permits reached 1.68 million, also exceeding forecasts.
– The U.S. dollar index (DXY) gained ground following the release.
– EUR/USD and GBP/USD both fell amid dollar strength.
– USD/CAD rallied as oil prices dropped and Canadian CPI missed estimates.
– USD/JPY rose, fueled by yield differentials and weak yen sentiment.
– Market focus shifts to upcoming U.S. PMI and Federal Reserve commentary.
In the sections below, we will take a closer look at how the USD’s strength has affected major currency pairs, factoring in technical analysis, economic indicators, and potential monetary policy shifts.
EUR/USD: Euro Falls as Dollar Advances
The euro weakened against the dollar as the stronger-than-expected housing report lifted U.S. Treasury yields and increased demand for the greenback. EUR/USD tested the 1.0730 support level during the session.
Contributing factors to the decline:
– Investors are recalibrating expectations for Eurozone growth in light of soft data.
– Political uncertainty in France continues to weigh on euro sentiment as early parliamentary elections approach.
– ECB’s dovish stance remains a drag, particularly after its June rate cut.
Technical Analysis:
– Immediate support near 1.0720 has held so far but remains under pressure.
– A break below 1.0720 opens the door toward 1.0660, corresponding to support from early May.
– Resistance lies at the 50-day moving average around 1.0800.
According to analysts at ING, the EUR/USD is likely to face ongoing pressure in the short term, especially if U.S. data continues to exceed expectations. The divergence in monetary policy between the hawkish Fed and dovish ECB could continue to push the pair lower.
GBP/USD: Sterling Slips Amid Dollar Rally
The British pound followed a similar path, retreating against the U.S. dollar as investor appetite favored the greenback. GBP/USD fell back towards the 1.2680 level, losing momentum after a relatively strong June performance.
Driving factors:
– Economic data from the UK was limited, offering no support to the pound.
– Traders are cautious ahead of the Bank of England’s interest rate decision later this week.
– Market consensus is split on whether the BoE will begin cutting rates in August or hold longer, pending further inflation data.
Technical Levels to Watch:
– Short-term support appears around 1.2650.
– Resistance is identified around 1.2765, with upside limited by the dollar’s rally.
– The next major support lies near 1.2520 if bearish momentum intensifies.
With UK general elections approaching in early July, risk sentiment may weigh on the pound regardless of domestic fundamentals, particularly
Read more on USD/CAD trading.