Title: US Dollar Strengthens Following Better-Than-Expected Housing Starts Report: EUR/USD, GBP/USD, USD/CAD, USD/JPY Outlook
Original article by Vladimir Zernov, FX Empire
Rewritten and expanded version by [Your Name]
The US dollar gained ground across multiple currency pairs following the release of stronger-than-anticipated housing starts data. This positive economic signal reinforced market expectations that the US economy remains resilient, despite monetary tightening. This article breaks down the impact of the data release on the major currency pairs and explores the technical setups and market sentiment around EUR/USD, GBP/USD, USD/CAD, and USD/JPY.
US Housing Starts Surprise to the Upside
On Tuesday, the US Commerce Department released data showing that housing starts rose more than expected in May. This renewed optimism about the US economy led traders to reevaluate the likelihood of Federal Reserve interest rate decisions going forward.
Key data highlights:
– Housing starts climbed 21.7 percent to a seasonally adjusted annual rate of 1.63 million units in May, the largest percentage increase since 2016.
– Building permits, another forward-looking indicator for the housing sector, rose by 5.2 percent to a rate of 1.49 million units.
– The data exceeded economists’ expectations, who had forecast a rate of 1.40 million starts and 1.43 million permits.
These figures hint at improving activity in the construction sector and signal greater investment in residential real estate. As a result, the US dollar’s appeal increased, backed by stronger economic fundamentals. In turn, the greenback appreciated against major currency peers such as the euro, British pound, Canadian dollar, and Japanese yen.
EUR/USD: Euro Loses Momentum Against the US Dollar
The EUR/USD currency pair came under pressure in the wake of the upbeat US housing starts report. The euro lost ground as investors increased their US dollar exposure following signs of economic resilience in the United States. The currency pair, which had been trading in a relatively tight range, broke below a key support level.
Technical overview:
– Resistance levels: Near-term resistance is seen around 1.0930. A break above this level could lead to a retest of 1.1000, a psychologically important barrier.
– Support levels: The nearest support level is around 1.0850. A move below this level could drive the pair towards 1.0800.
Fundamental drivers:
– The European Central Bank (ECB) has maintained its hawkish rhetoric, but economic data from the Eurozone failed to match US indicators in strength. Sluggish growth in Germany and other EU nations creates a divergence between ECB and Fed policy paths.
– Market participants are increasingly favoring the US dollar as the Fed remains non-committal to immediate rate cuts, citing persistent inflation in certain segments of the economy.
Outlook:
Unless the Eurozone sees more robust economic figures, the EUR/USD is likely to remain vulnerable to further downward moves. Traders will be closely watching upcoming inflation and services PMI data for direction.
GBP/USD: Pound Drops Amid Dollar Strength and Domestic Uncertainty
The British pound also dropped against the US dollar on Tuesday as forex markets digested housing market optimism in the US and awaited crucial data on UK inflation. Moreover, uncertainties around the Bank of England’s (BoE) next policy steps weighed on sterling.
Technical overview:
– Resistance levels: Strong resistance stands near 1.2800. A daily close above this point would signal reassessment of the uptrend.
– Support levels: The 1.2700 level is offering immediate support. If this breaks, the pair could decline towards 1.2650 or even lower.
Key market influences:
– UK Consumer Price Index (CPI) release is expected imminently and will have a major bearing on BoE policy decisions. Expectations are mixed, with a possibility that inflation remains sticky, which could sustain or renew BoE hawkishness.
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