Dollar Gains on Housing Data

Daily Analysis - 21/10/2015

Larger Than Expected Pickup in Housing Starts Puts US in Front Seat


The Greenback is expected to stay on the back foot as the Bank of Canada’s monetary policy notes are due later today followed by the ECB’s tomorrow. The Federal Reserve members enter into a period of blackout ahead of the FOMC monetary policy next week.

Yahoo! Misses Q3 Earnings Estimates

Yahoo Inc. reported third quarter earnings on Tuesday after the closing bell. The California-based company reported a weaker than expected quarterly net delivering an EPS of $0.08, softly beating street estimates of $0.07. In its forward guidance, the company noted that it expects Q4 sales to be around $920 to $960 million, which was below market estimates of $1.33 billion. Shares in the company fell 1.16% in the after hours trading session while the company closed yesterday at $32.80. Prices in the company bounced off the lows at $27.55 with support at $31 and resistance at $37.


US Housing Data a Mixed Bag

Housing data from the US was a mixed bag as housing starts gained 6.5% for the month including an upward revised number for last month. US building permits on the other hand declined -5.0% indicating a mediocre pace of growth. Demand for new dwellings rose as US employment continued to improve steadily alongside an accommodative monetary policy which has kept the US Fed funds rate at historic lows. The biggest gains in housing came from multi-unit starts which notched a second straight increase after previously spiking in June this year. The US Dollar initially reacted strongly to the news rising across the board as the USDJPY posted a fourth consecutive day of gains closing at 119.832.


Euro Firm But Range Bound into ECB Meet

EURUSD closed yesterday's session with gains at 1.1345 after briefly testing the highs to 1.1386. The single currency has been trading sideways and could remain so into tomorrow's ECB monetary policy meeting. Expectations are divided as to whether Mario Draghi will announce an expansion to the ECB's QE program while some estimate that tomorrow is likely to be a non-event, just some verbal intervention to talk down the exchange rate. EURUSD has formed a strong resistance near the 1.1458 region which has failed to clear on two previous occasions. A break above this resistance level could however see EURUSD aim for previous highs at 1.16.


Bank of Canada Monetary Policy

The Bank of Canada is due to meet today for its monetary policy review. Expectations into today’s event are for the BoC to hold rates steady at 0.5%. Economic data has from Canada has been largely unchanged since the BoC's previous meeting. Yesterday’s wholesale sales data was a bit disappointing, declining -0.1%, however it is unlikely to be a major discussion point for the BoC. What we might get to see is a dovish narrative from the BoC or downward revised growth forecasts which could keep the Canadian dollar relatively volatile. USDCAD has been in a steady short term downtrend after prices hit multi-year highs of 1.335 few weeks ago. With fading FOMC expectations on rate hikes, the Canadian dollar has managed to gain ground in the near term.


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