US: Housing market set to shrink

Forex News and Events

The housing market is an important tool to more accurately appraise the real situation in the U.S even if officially Fed members’ attention is said to remain focused on inflation and jobs data. Indeed, Hawkish members claim that employment conditions would fuel inflation, while doves support the idea of a reserve army that would flow back in the job markets as soon as the situation improves. In any case, it is clear that there is growing dissension surrounding jobs market statistics, which are been said to not accurately depict the current situation. Therefore, it is important to get additional evidence that would support a monetary change. And we clearly believe that housing data will provide additional evidence that the U.S economy is struggling to recover.

Low interest rates and steady unemployment have provided important traction to underpin the housing market. This is not likely to stop as last month’s October existing home sales increased by 4.7% m/m against the backdrop of constant jobs creation and mixed economic conditions. The main issue is that the era of zero interest-rate is not over and this adds upside pressures to house prices. On the contrary, the negative global outlook is adding downside pressures to today’s existing home sales will we expect to print in lower than consensus at -2.7% m/m. The EURUSD is set to gain on this data release. Events outside of the U.S won’t be the only drivers for broad USD trend. The economic situation in the U.S is largely overestimated and the Fed will soon have a hard time justifying the inefficiency of the three quantitative easings they have launched over the past seven years. The greenback is currently strengthening on too important December Fed rate hike hopes. Over the very short-term, we expect a retracement of the pair towards 1.0700.

Crude Oil - Failing To Hold Below 40.00

The Risk Today

Yann Quelenn

EUR/USD remains in a downtrend channel. The technical structure is clearly negative. The pair lies above 1.0600. Hourly support is given at 1.0601 (intraday low). Hourly resistance can be found at 1.0763 (19/11/2015 high). Stronger resistance stands at 1.0897 (05/11/2015 high). Expected to show consolidation of the pair. In the longer term, the technical structure favours a bearish bias as long as resistance holds. Key resistance is located region at 1.1453 (range high) and 1.1640 (11/11/2005 low) is likely to cap any price appreciation. The current technical deteriorations favours a gradual decline towards the support at 1.0504 (21/03/2003 low).

GBP/USD has weakened below 1.5200. Hourly support can be found at 1.5027 (06/11/2015 low). Strong resistance can be found at 1.5529 (22/09/2015 high). Expected to show continued weakness. The long-term technical pattern is negative and favours a further decline towards the key support at 1.5089 , as long as prices remain below the resistance at 1.5340/64 (04/11/2015 low see also the 200 day moving average). However, the general oversold conditions and the recent pick-up in buying interest pave the way for a rebound.

USD/JPY has broken uptrend channel but is still strengthening. The short-term technical structure still favours a further rise. Strong support lies at 120.80 (22/10/2015 low). Expected consolidation before entering into another upside move. A long-term bullish bias is favored as long as the strong support at 115.57 (16/12/2014 low) holds. A gradual rise towards the major resistance at 135.15 (01/02/2002 high) is favored. A key support can be found at 116.18 (24/08/2015 low).

USD/CHF has bounced back on the hourly support at 1.0221 (18/11/2015 low). Hourly support is given at 0.9944 (06/11/2015 low). The technical structure still suggest that the upside momentum is not over. Expected to show continued strengthening. In the long-term, the pair has broken resistance at 0.9448 and key resistance at 0.9957 suggesting further uptrend. Key support can be found 0.8986 (30/01/2015 low). As long as these levels hold, a long term bullish bias is favoured.

Resistance and Support: