For How Long USD Will Keep On Rising ?

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The last day of the week came in with the lack of fundamentals, whether during the European morning session, or the upcoming US session ahead. Yet, there are still some economic figures will be released from the US, which set to have a notable impact on the markets. In today’s article we will take a look at the US housing data, what does it mean for the Federal Reserve and how the US dollar may react to today’s data.

Definitions

Building Permits: Annualized number of new residential building permits issued during the previous month. Released monthly, about 17 days after the month ends. While this is monthly data, it’s reported in an annualized format (monthly figure x12).

Housing Starts: Annualized number of new residential buildings that began construction during the previous month. While this is monthly data, it’s reported in an annualized format (monthly figure x12). This data is slightly overshadowed by Building Permits because they are tightly correlated, and a permit must be issued before a house can begin construction.

Why Traders Should Follow These Figures

Building Permits: It’s an excellent gauge of future construction activity because obtaining a permit is among the first steps in constructing a new building.

Housing Starts: It’s a leading indicator of economic health because building construction produces a wide-reaching ripple effect. For example, jobs are created for the construction workers, subcontractors and inspectors are hired, and various construction services are purchased by the builder.

Higher Permits But Lower Starts

Traders usually look at the housing data as a one-way bet. Meaning, traders looks at the data whether if they are higher than last month or lower. Then they would decide whether the data are positive or negative. However, there are very important factors that traders need to keep in mind when these figures are announced; higher permits don’t mean higher starts and vise verse.

What Matters The Most?

Whenever those two figures are on the Agenda, traders needs to be very careful with the various outcomes. As noted above, higher permits are positive, but it would be even better to see higher permits and higher housing starts. For me, higher building permits don’t mean anything if the housing starts were weak.

For How Long USD Will Keep On Rising

Janet Yellen was positive, hawkish and balanced in her latest press conference this week; the Federal Reserve decided to raise the Fed Fund rate by 25bps as widely expected. However, the Dot Plot showed that there is a possibility for three rate hikes in 2017. Yet, this doesn’t mean that the Fed will be able to raise rates for sure. Last year they were anticipating to raise rates 4 times in 2016, but they ended up raising it once.

In the Meantime, the US Dollar is likely to remain strong, given the fact that rates expectations are still on the upside, side by side with inflation due to Donald Trump Plan. Yet, an acceleration in USD gains won’t be helpful for the Fed as it would put more drag on inflation, growth, and exports. Therefore, we suspect the Fed members to be more dovish in their remarks to journalists in the coming weeks.

Levels To Watch

Symbol S3 S2 S1 Pivot R1 R2 R3
EURUSD 1.0158 1.0261 1.0338 1.0441 1.0518 1.0621 1.0698
USDJPY 115.48 116.22 117.19 117.93 118.90 119.64 120.61
GBPUSD 1.2136 1.2254 1.2336 1.2454 1.2536 1.2654 1.2736
USDCHF 1.0048 1.0117 1.0208 1.0277 1.0368 1.0437 1.0528
USDCAD 1.3107 1.3186 1.3261 1.3340 1.3415 1.3494 1.3569
AUDUSD 0.7213 0.7272 0.7315 0.7374 0.7417 0.7476 0.7519
NZDUSD 0.6870 0.6938 0.6988 0.7056 0.7106 0.7174

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