Mid-Day Report: Dollar Soft after Housing Data

Dollar stays soft against European majors in early US session after release of new residential construction data. Housing starts rose 5.9% to 896k annualized rate in June but missed expectation of 905k. Building permits rose 2.7% to 943k annualized rate but was also slightly lower than expectation of 945k. Non-farm productivity was revised higher to 0.9% in Q2 while Unit labor costs was also revised higher to 1.4%. EUR/USD continues to stay above 1.33 level even though there is not enough buying momentum to push it through 1.34 key near term resistance yet. DOW open mildly lower and is set to have the first back-to-back weekly decline since late June on expectation of Fed’s tapering. Treasury yields, on the other hand, jumped in initial trading.

Canadian dollar is even weaker than the greenback today with USD/CAD recovering back to 1.034 level even though it’s staying in tight range. Manufacturing shipments in Canada unexpectedly dropped -0.5% mom in June versus expectation of 0.4% mom. International securities transactions showed foreign investors dumped CAD 15.4b in Canadian securities in the month of June. AUD/CAD resumed the rebound from 0.9169 short term bottom and broke 0.95 handle. The cross is expected to rise further towards 55 days EMA (now at 0.9598) in near term.

Other data released today saw Eurozone CPI finalized at 1.6% yoy in July while ore CPI was at 1.1% yoy. Eurozone trade surplus widened to EUR 14.9b in June while current account surplus narrowed to EUR 16.9b.

Daily Pivots: (S1) 1.3245; (P) 1.3304 (R1) 1.3402; More….

EUR/USD edges further higher to 1.3379 in early US session but is still kept below 1.34 resistance. Intraday bias remains neutral. Break of 1.3182 support will indicate that rebound from 1.2755 has completed at 1.3400 already. In such case, deeper fall should back seen back to retest 1.2755 support. However, decisive break of 1.3416 will have larger bullish implication and would target 1.3710 resistance next.

In the bigger picture, overall, price actions from 1.6039 is viewed as a corrective pattern which is still in progress. Current development argues that fall from 1.3710 is extending the correction lower. Break of 1.2042 would likely pave the way to 1.1209 long term fibonacci level next. Though, sustained break of 1.3416 will likely bring another rise through 1.3710 to extend the whole rally from 1.2042.

EUR/USD 4 Hours Chart

EUR/USD Daily Chart

GMT
Ccy
Events
Actual
Consensus
Previous
Revised
08:00
EUR
Eurozone Current Account (EUR) Jun
16.9B

19.6B

09:00
EUR
Eurozone CPI M/M Jul
-0.50%
-0.50%
0.10%

09:00
EUR
Eurozone CPI Y/Y Jul F
1.60%
1.60%
1.60%

09:00
EUR
Eurozone CPI – Core Y/Y Jul F
1.10%
1.10%
1.10%

09:00
EUR
Eurozone Trade Balance (EUR) Jun
14.9B
15.3B
14.6B
13.8B
12:30
CAD
International Securities Transactions (CAD) Jun
-15.4B
5.00B
6.74B
6.78B
12:30
CAD
Manufacturing Shipments M/M Jun
-0.50%
0.40%
0.70%
0.60%
12:30
USD
Non-Farm Productivity Q2 P
0.90%
0.60%
0.50%

12:30
USD
Unit Labor Costs Q2 P
1.40%
1.20%
-4.30%

12:30
USD
Housing Starts Jul
896K
905K
836K
846K
12:30
USD
Building Permits Jul
943K
945K
911K
918K
13:55
USD
U. of Michigan Confidence Aug P
80.0
85.3
85.1

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