Original article by Vladimir Zernov via FX Empire:
Source: 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
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# U.S. Dollar Strengthens on Strong Housing Data: Market Analysis and Forecast for EUR/USD, GBP/USD, USD/CAD, and USD/JPY
The U.S. Dollar advanced against several major currencies following the release of upbeat housing starts data in the United States. The solid performance of the real estate sector reinforces expectations that the Federal Reserve may keep interest rates elevated for a longer period, providing additional support for the greenback. The foreign exchange (Forex) markets responded as investors factored in the likely path of monetary policy in the U.S., fueled by the resilience of the domestic economy.
This article examines the impact of the strong housing report and provides a technical and fundamental outlook for four major currency pairs: EUR/USD, GBP/USD, USD/CAD, and USD/JPY.
## U.S. Housing Starts: Key Driver Behind the Dollar’s Surge
Economic data out of the U.S. highlighted a surprising strength in housing activity. According to the latest report:
– Housing starts surged to 1.631 million in April 2024, significantly higher than the consensus estimate of 1.420 million.
– Building permits also exceeded expectations, coming in at 1.440 million compared to the projected 1.400 million.
This robust performance suggests that the housing sector is recovering from earlier weakness. The report provides further evidence of economic resilience, despite persistent concerns about the impact of high interest rates.
The markets interpreted this data as a sign that the Federal Reserve may maintain a hawkish stance in the short to medium term. Traders are increasingly pricing in the possibility of delayed rate cuts or even an extended period of steady interest rates.
## EUR/USD: Testing Support Levels Amid Dollar Strength
The EUR/USD continued its decline, dragged down by the strengthening U.S. dollar and moderate economic performance in the Eurozone.
### Fundamental backdrop:
– The Eurozone continues to grapple with sluggish economic growth and subdued inflation.
– The European Central Bank (ECB) is expected to initiate rate cuts in the coming months as inflationary pressures continue to dissipate.
– Diverging monetary policies between the ECB and the Fed are a key factor behind the pair’s downward trajectory.
### Technical analysis:
– The pair is currently testing support near the 1.0800 level.
– A break below this level could open the door to further downside toward the 1.0750 and 1.0700 support zones.
– On the upside, resistance is seen at 1.0870, followed by 1.0900.
The bearish momentum remains intact and could continue unless market sentiment changes or incoming U.S. data disappoints.
### Key support/resistance levels:
– Support: 1.0800, 1.0750, 1.0700
– Resistance: 1.0870, 1.0900, 1.0950
## GBP/USD: Struggles to Maintain Momentum Below 1.2700
The British Pound edged lower against the U.S. Dollar as traders adjusted expectations based on the improving U.S. macroeconomic landscape.
### Fundamental drivers:
– The Bank of England is leaning toward a gradual rate cut trajectory, with inflation showing tentative signs of cooling.
– Weakness in UK retail sales and tepid wage growth add to the case for a more dovish policy stance.
– Political uncertainty in the U.K., including upcoming elections and Brexit-related trade complications, may also weigh on the currency.
### Technical perspective:
– GBP/USD dropped below the psychological 1.2700 barrier and is currently trading in a transitional zone.
– Strong support is located near the 1.2620 – 1.2650
Explore this further here: USD/JPY trading.