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American Housing Rebound Faltering

Housing Market Blighted by a String of Disappointing Data Points

Curiously absent from the latest Federal Reserve Chair testimony was commentary regarding the state of the housing economy which has seen results fading to the downside in recent months. The Fed driven recovery in asset prices appears to be waning in the real economy just as lumber prices hit 18-month lows.

Housing Recovery in Doubt

The latest U.S. housing figures are casting further doubts on the robustness of the latest housing recovery, just as the Federal Reserve attempts to guide markets on the timeline for raising interest rates. New home sales released yesterday managed to beat expectations modestly month over month but fell marginally below the prior month’s figures. However, when coupled with the drop in median prices and tumbling existing home sales, the outlook looks more fragile. Remarks from the parent company of the S&P Case-Shiller Home Price Index confirmed this fear, noting that “the housing recovery is faltering.” Sales figures are still well below peaks reached in 2005 and these comments come even as prices gained moderately despite falling the previous 3 reporting periods.

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sp-mar1502262015

Oil Prices Gain

The strategy of selling API data and buying EIA data continues to prove a strong strategy for investors trading crude oil. Although the previous sessions API Crude Stocks data release saw oil prices fall below $50 per barrel, the EIA Crude Oil Inventories number saw prices rebound to the upside. The latest figures released by the U.S. Department of Energy showed that inventories rose to a record, climbing approximately 8.4 million barrels while domestic output increased for the fifth straight week. Although comments from Saudi Oil Minister Al-Naimi buoyed prices after he cited a pickup in demand, energy markets remain largely oversupplied as producers ramp output higher. Lacking demand from consumers such as China continues to haunt equilibrium prices as suppliers seek a rebound from multi-year lows.

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Nasdaq Near Record

Stocks are content to ignore economic indicators as major benchmarks set new record highs or approach old records. The Nasdaq has seen large-cap equities like Amazon and Apple propel the index back towards highs seen before the dot-com bubble burst in the year 2000. These moves come amidst Federal Reserve warnings about the “stretched” nature of equity valuations and soaring price-to-earnings multiples. Although financial assets rarely mirror developments in the real economy, the divergence means that any major shift in U.S. economic fundamentals could see equity benchmarks follow data to the downside.

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AUDJPY Equidistant Channel Technical Pattern

With no expected imminent changes expected for already super dovish Japanese monetary policy, Australian policy is driving price movements in the AUDJPY pair. The Reserve Bank of Australia’s surprise cut to the benchmark rate saw the Australian dollar tumble further towards the RBA’s target as tumbling commodity prices sap growth from the economy. Data due overnight from Japan will show that the Bank of Japan’s easing efforts have helped grow industrial production by making exports more competitive, however, consumer spending is forecast to remain subdued as the outlook is persistently murky. The equidistant channel technical setup in the pair suggests further upside in the near-term trend before a possible breakout. Optimal strategy for the pattern is long positions at the bottom of the channel closed at the top of the channel. Opposing the channel is not advised based on worsening risk-reward characteristics.

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