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Homebuilding surprised to the upside in August even amid Hurricane Harvey's wrath, which disrupted activity in the final days of August. Markets had anticipated a 1174k print but homebuilders broke ground on 1180k units, from an upwardly revised July figure (+35k).

Single-family starts advanced by 13k from a downwardly revised July reading (-18k), clocking in at 851k, while multi-family construction contracted (-23k), to 329k, from an upwardly revised (+53k) July figure.

Building permits came in strong at 1300k, while markets had anticipated 1220k. The volatile multi-family segment accounted for the entirety of the increase (+82k), with single-family permits stumbling (-12k) from an upwardly revised July reading (+1k) to clock in at 800k in August.

As expected, activity in the South weighed (-48k) on account of construction disruptions related to Hurricane Harvey, which made landfall in Texas on August 25th. Apart from this, both the West (+12k) and Midwest (+36) saw homebuilding gain momentum, while the Northeast saw a retrenchment in activity (-10k) for the second consecutive month.

Key Implications

Today's report is a healthy one when considering the negative impact from Hurricane Harvey on construction combined with the upward revisions to July's figures. Although the continued effects of Hurricane Harvey, in addition to Hurricane Irma, will lead to a cooling in September's housing starts, this activity will be recouped as the year progresses. With an estimated minimum 20k houses destroyed in the two hurricanes combined, residential investment will receive a boost in the fourth quarter of 2017 and first half of 2018 as rebuilding begins, with additional, but diminishing impacts likely to be felt in the quarters thereafter.

Consumers are reaping the benefits of a tightening labor market and this will support homebuilding as wages turn higher. Demand remains strong as reflected in current record-low selling times in the new home market, with lending conditions also remaining supportive. Mortgage rates in August were over 30 basis points lower than their recent peak at the start of the year.

All told, while the following months are expected to reflect additional hurricane-related disruptions to construction, this report confirms that fundamentals remain strong in the housing market and will continue to support residential investment as a positive contributor to growth over the next year.

The currency pair is trading in the red right now and tries to retreat a little after the yesterday's amazing rally. Remains to see what will happen later as the United States is to release important economic data. The fundamental factors will drive the rate so you should be very careful not to suffer a heavy loss.

We may have some volatility in the US trading session, the USD needs a helping hand from the United States economy, but remains to see if will receive one.

The Building Permits could decrease from 1.23M to 1.22M in the previous month, while the Current Account is expected to increase from -117B to -115B in the Second Quarter. Moreover, the Housing Starts may increase to 1.17M, from 1.16M, while the Import Prices could increase by 0.4%, beating the 0.1% growth in the former reading period.

Price dropped a little today, but continues to pressure the lower median line (LML) of the red descending pitchfork and the median line (ml) of the blue descending pitchfork. Only a valid breakout above these levels will confirm a further increase. However, a rejection from the confluence area formed at the intersection between the LML with the median line (ml) will send the rate towards the 150% Fibonacci line (down sloping red line). I've drawn a minor blue ascending pitchfork hoping that I'll catch a broader upside movement, technically is expected to reach the median line (ml), but a disappointment from the US later will send the rate tumbling.

The Brent Oil rallied today and tries to stay higher despite the yesterday's drop. Price maintains a bullish perspective as is trading in the buyer's territory, the major upside target remains at the median line (ML) of the major ascending pitchfork. I've said in the last weeks that it could reach the $57 per barrel very soon.

Is trapped within the ascending channel, so it should approach and reach fresh new highs in the upcoming period even if will make a small correction.

Price rallies again, but remains to see if will have enough directional energy to reach and retest the third warning line (WL3) of the major descending pitchfork. Has shown some exhaustion signs in the last days because has failed to stabilize above the 38.2% retracement level. Only a valid breakout above the WL3 will confirm a further increase, while a failure to reach it will signal another leg lower.

USD/JPY - 111.33

Original strategy  :

Buy at 111.00, Target: 112.00, Stop: 110.65

Position :  -

Target :  -

Stop : -

New strategy  :

Buy at 110.70, Target: 111.70, Stop: 110.35

Position :  -

Target :  -

Stop : -

As the greenback has retreated after rising to 111.88, suggesting minor consolidation below this level would be seen and pullback to 111.00 cannot be ruled out, however, reckon 110.60-70 would limit downside and bring another rise later, above said resistance would extend recent upmove to 112.00, then 112.20 (previous resistance) but near term overbought condition should prevent sharp move beyond 112.40-45.

In view of this, would not chase this move here and would be prudent to buy dollar on subsequent pullback as 110.60-70 should limit downside. Below the lower Kumo (now at 110.50) would abort and signal a temporary top is formed instead, risk correction to 110.30, then towards 110.00 which is likely to hold from here.

The USDJPY pair moved to its highest trading level since July 27th during the pre-European session market open, hitting 111.87, as large stop-loss orders were triggered above the pairs monthly pivot point.

Price-action has now softened, with the pair turning lower to test intraday buying demand back towards the USDJPY key 200-day moving average, currently located at the key 111.47 level.

Going forward, today's daily price-close will be critical, with USDJPY buyers looking for a second daily candle to close above the pairs 200-day moving average.

Key intraday resistance is found at 111.65, the current daily price-high at 111.87 and the July 26th swing-price high, at 112.19.

To the downside, key technical support below the 111.47 level is found at 111.37, and the 100-week moving average, at 111.13.

Below 111.13, further support is found at 110.84, 110.68 and the pairs weekly pivot point, at 110.10.

The EURUSD pair has moved to an intraday price-high of 1.2006, after a series of positive eurozone economic data points. The German ZEW survey for the month of September, beat market expectations and the eurozone's current account surplus also widened.

Going forward, the euro retains a strong position against the greenback, ahead of tomorrow's Federal Reserve interest rate decision whilst price-action holds above the pairs weekly pivot point, found at 1.1938.

Despite today's bullish intraday rally above the 1.2000 level, the euro failed to break above the former weekly high, at 1.2029. A higher weekly price higher, should signal further EURUSD gains, whilst multiple price failures below the 1.2029 level may signal a deeper downside correction on the pair.

Key technical support is located at the current daily price low, at 1.1953, and the weekly pivot point, at 1.1938. Below 1.1938, price will likely target towards 1.1915, and 1.1889.

To the upside, key intraday resistance is found at 1.1979 and 1.2006. Above the 1.2006 level, further resistance is found at the former weekly high, at 1.2029, and the key long-term Fibonacci resistance level, 1.2039.

Good day traders! Today's focus is EURGBP and Crude oil.

On the bearish side of euro the most interesting pair can be EURGBP which is trading nicely lower this month. As such, traders may keep a close eye on corrective pullbacks in three legs before downtrend may resume. We are tracking a fourth wave right now which may rise even to 0.8930/0.8980 zone from where a new drop lower may show up, ideally later this week.

EURGBP, 1H

Crude oil is very interesting, now looking bullish again after recent spike down to 49.60 where energy might have completed a three wave drop within wave four pullback. We think that sooner or later price will break to a new high and extend up to 51.50, maybe even 52.00 by the end of the week.

Crude oil, 1H

Daily Pivots: (S1) 1.1463; (P) 1.1481; (R1) 1.1516; More... .

EUR/CHF surges to as high as 1.1562 so far today. The break of 1.1537 resistance indicates resumption of medium term rise. Intraday bias is back to the upside for 61.8% projection of 1.0830 to 1.1537 from 1.1355 at 1.1792 next. However, considering weak upside momentum so far, break of 1.1438 will turn focus back to 1.1355 support instead.

In the bigger picture, long term rise from SNB spike low back in 2015 is still in progress. EUR/CHF should now be heading back to prior SNB imposed floor at 1.2000. For now, this will be the favored case as long as 1.1087 resistance turned support holds.

Euro surges to highest level since 2015 against Swiss Franc today as boosted by solid improvement in economic sentiments. But the common currency is overwhelmed by Aussie and Kiwi on strong risk appetite. Meanwhile, Sterling also regained ground after the pull back following BoE Governor Mark Carney's cautious speech yesterday. Dollar is generally softer as markets await FOMC policy decision and press conference tomorrow. In other markets, Gold is gyrating in tight range around 1310 but is vulnerable to another dip to 1300 handle. WTI crude oil is also struggling around 50.

Republicans in last-ditch effort to repeal Obamacare

In US, Senate Republicans are coming back with one last-ditch effort to repeal Obamacare. And they need to act by September 30, using a fast-track procedures. But for the moment, John McCain of Arizona, Rand Paul of Kentucky, Susan Collins of Maine and Lisa Murkowski of Alaska are not offering support yet. Released from US, housing starts dropped to 1.18m annualized rate in August, building permits rose to 1.30m. Import price index rose 0.6% mom. Current account deficit widened to USD -123b in Q2. From Canada, manufacturing shipments dropped -2.6% mom in July.

German ZEW suggests worry of Euro strength has "faded into the background"

German ZEW economic sentiment rose 7 points to 17 in September, well above expectation of 12. While the improvement is notable, it's staying below historical average of 23.8. Current situation gauge also improved to 87.9, up from 86.7 and beat expectation of 86.3. Eurozone ZEW economic sentiment rose to 31.7, up from 29.3 and beat expectation of 32.4. ZEW president Achim Wambach noted in the statement that 'the solid growth figures in the second quarter of 2017 in combination with a steep rise in bank lending and increasing investment activities by both the government and private firms are likely reasons for the financial market experts' significantly more positive outlook compared to that of last month." Also, "the worries about the recent strengthening of the euro have, for now, also faded into the background." Also from Eurozone, Current account surplus widened to EUR 25.1b in July.

ECB may keep QE extension open

Reuters reported, quoting unnamed source, that ECB would likely keep the options of prolonging the asset purchase in 2018 open. There are two camps among ECB policymakers. The hawk are already preferring to wind down the EUR 2.3T program. On the other hand, the doves just prefer to slow down from EUR 60b a month purchase. Meanwhile, the strength of Euro is seen as the "number one problem" for one of the sources. Another source noted that US economic policy is another "main source of uncertainty". Also, ECB President Mario Draghi was very careful in his words and used "recalibration" of the program before. Another source noted that "recalibration is not tapering, it's open ended".

BoE Kohn warned of impact of monetary stimulus exit

Donald Kohn,  a member of the BoE's Financial Policy Committee, urged global central banks to closely watch the risks of global monetary stimulus exit. Hit said that "macro and micro-prudential policies need to be alert to and anticipate financial stability risks that might arise as rates rise and central bank portfolios stabilize and then decline." He pointed to stress tests" as an "essential tool for spotting risks and building resilience". And that's particularly as "interest rates rise along the yield curve." "The curve itself may even twist in unexpected ways, revealing vulnerabilities in asset prices and portfolio choices." 

BoE Carney talked cautious on rate hikes

Yesterday, BoE Governor Mark Carney sounded cautious in his speech at the IMF. He reiterated that interest rates may rise "within months" in reaction to surging prices. But he emphasized that "any prospective increases in Bank Rate would be expected to be at a gradual pace and to a limited extent". Meanwhile, Carney described Brexit as an example of "deglobalization". And "the de-integration effects of Brexit can be expected... to be inflationary."  He pointed out that lower immigration to the UK may boost domestic wage growth. Also, new trade barriers would lead to higher prices for goods and services. Meanwhile, the economic impacts of Brexit are subject to "tremendous uncertainty" in terms of scale and timing.

RBA talked jobs, Aussie, iron and household debt in minutes

The RBA minutes for the September meeting contained little news. Four main areas of discussions include employment situation, Australian dollar, iron prices and the balance of household debt and low inflation. Policymakers acknowledged the improvement in the employment market, noting higher participation rate and steady unemployment rate. RBA appeared less worrisome about Aussie's strength. By attributing the appreciation of the Australian dollar to USD's weakness, it appears less likely that RBA would take actions to curb its strength. RBA expected iron ore prices to fall amidst new supply. As the biggest exporter of iron ores, Australian dollar has been affected by the movement in iron ore prices. More in RBA Minutes: More Confident Over Job Market, Less Action Against Rising Aussie.

Also from down under, New Zealand Westpac consumer confidence dropped to 112.4 in Q3. Australia house price index rose 1.9% qoq in Q2.

EUR/CHF Mid-Day Outlook

Daily Pivots: (S1) 1.1463; (P) 1.1481; (R1) 1.1516; More... .

EUR/CHF surges to as high as 1.1562 so far today. The break of 1.1537 resistance indicates resumption of medium term rise. Intraday bias is back to the upside for 61.8% projection of 1.0830 to 1.1537 from 1.1355 at 1.1792 next. However, considering weak upside momentum so far, break of 1.1438 will turn focus back to 1.1355 support instead.

In the bigger picture, long term rise from SNB spike low back in 2015 is still in progress. EUR/CHF should now be heading back to prior SNB imposed floor at 1.2000. For now, this will be the favored case as long as 1.1087 resistance turned support holds.

Economic Indicators Update