Title: U.S. Dollar Strengthens Amid Upbeat Housing Data: EUR/USD, GBP/USD, USD/CAD, and USD/JPY Outlook
Source: Original article written by Vladimir Zernov for FX Empire
Original URL: https://www.fxempire.com/forecasts/article/u-s-dollar-gains-ground-as-housing-starts-beat-estimates-analysis-for-eur-usd-gbp-usd-usd-cad-usd-jpy-1542499
Author: Vladimir Zernov
Date of Original Publication: April 16, 2024
Overview:
The U.S. dollar advanced against major currencies following better-than-expected housing starts data that pointed to resilience in the American housing market. As market participants revised their expectations for upcoming Federal Reserve actions, major currency pairs including EUR/USD, GBP/USD, USD/CAD, and USD/JPY responded with notable movements. Strong housing starts bolstered confidence in the U.S. economy, undercutting the need for imminent Fed rate cuts and adding upward momentum to the greenback.
This article provides an in-depth technical and fundamental analysis of key forex pairs in light of the recent economic data released from the U.S., focusing on short-term trading clues and longer-term projections.
U.S. Economic Data and Market Context:
Strong U.S. housing data emerged as a key catalyst in reinforcing the current optimistic view on the economy, adding strength to the U.S. dollar across the Forex board. Specifically:
– March U.S. housing starts rose to 1.45 million (annualized), surpassing the forecast of 1.48 million.
– Building permits also increased, a positive sign for upcoming construction activity and overall real estate sector momentum.
– The data hints at persistent underlying demand despite elevated interest rates, suggesting that the Fed might delay potential cuts.
This economic backdrop renewed investor enthusiasm for the greenback, putting pressure on currencies like the euro, the pound, and the loonie.
Currency Pair Analysis
EUR/USD: Euro Under Pressure as Dollar Gathers Momentum
The euro dipped as the U.S. dollar gained ground powered by stronger economic data. Recently, the European Central Bank (ECB) has signaled a more dovish tone relative to the Fed, as inflation begins to cool in the Eurozone. With the U.S. posting firmer economic indicators, the divergence in central bank positions has tilted the balance in favor of the dollar.
Key Technical Levels:
– Immediate support: 1.0600
– This level has served as a psychological pivot point and remains critical in the near term. A break below could trigger further selloffs.
– Resistance: 1.0700 and 1.0750
– These levels coincide with the 50-day moving averages and a trendline that has been reinforced in recent sessions.
– RSI: Around 40–42, signaling continued bearish momentum but not yet oversold.
Trading Outlook:
EUR/USD remains under selling pressure. If 1.0600 is breached, next support lies around 1.0530. On the upside, only a clear rally above 1.0700 might reverse the short-term bearish trend. Traders are closely watching any signals from the ECB about future monetary policy.
GBP/USD: Pound Weakens as U.S. Data Outshines U.K. Fundamentals
The British pound lost ground as the U.S. dollar benefitted from macroeconomic support. The U.K. continues to grapple with persistent inflation and weak growth, prompting a cautious Bank of England (BoE). Although the BoE is not rushing to cut rates, its neutral tone, when juxtaposed with the more robust U.S. economy, has weighed on sterling.
Key Technical Levels:
– Immediate support: 1.2370
– This level coincides with a key horizontal support zone and a previous consolidation area.
– Resistance: 1.2450 and 1.2520
– Sellers have responded strongly here in previous trading
Explore this further here: USD/JPY trading.