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Homebuilding took a nosedive in May, marking a third consecutive monthly decline and erasing the gains made at the start of the year. Starts fell 64k to 1092k in May from a downwardly revised 1156k print for April. The number was below market expectations that anticipated a 1220k pace of starts.

Single-family homebuilding posted a 32k decline on the month, with the multi-family segment down by the same amount. This performance will be detrimental to growth in Q2 with residential investment expected to be a modest drag on activity during the quarter.

Building permits also came in well below expectations, falling to 1168k in May, while markets had anticipated a 1249k print. This month, the volatile multi-family segment accounted for the majority of the decline, while the single-family segment subtracted a more modest 15k from building intentions relative to April.

Activity in the South has been consistently weak, and this region accounted for the majority of the decline, falling by 51k in May. The Midwest weighed (-17k) but declined from a stellar reading last month. The Northeast maintained its pace of building from April at 87k, while the West posted a meagre 4k increase in builds.

Key Implications

Housing has been a key contributor to growth during the recovery, but after a strong start to the year the robust performance will not be repeated this quarter. Rising mortgage rates and new home prices have weighed on affordability even as the labor market gains traction. Moreover, the weakness in permit activity offers no consolation, suggesting that a quick bounceback is not in the cards.

Builders have faced challenging conditions related to a shrinking pool of labor, land availability, and rising material prices - including wood - which have resulted in rising new home prices. Many of these will continue to weigh on the sector, but some rebound later this year should materialize as demand for homes rises. In particular, we expect the building of single-family homes to pick up in the coming months, allowing housing to contribute to growth later this year. Overall, builders remain optimistic, with the June NAHB survey reporting a healthy level of confidence.

This report adds to the string of disappointing releases in recent weeks. Still, despite the modest drag from residential investment this quarter, we expect economic growth to clock in at just over 3%.

US oil bounced on Friday from $44.22 low where the price found temporary footstep. Recovery was signaled by reversal of daily RSI from oversold territory and is seen as consolidation ahead of final push towards key support at $43.74 (05 May low). Strong bearish sentiment on concerns over global oversupply and another disappointing crude stocks release keep oil price under increased pressure. Bearish technical studies support negative scenario which requires weekly close below $45.32 (Fibo 61.8% of $39.20/$55.22) for confirmation. Meantime, bears could be interrupted by corrective action on oversold studies. Limited correction is seen ahead of fresh push lower, with strong barriers at $45.08/60 ( Fibo 38.2% / 61.8% of $46.46/$44.22) and $45.82 (falling 10SMA) expected to ideally cap.

Res: 45.08; 45.34; 45.60; 45.82

Sup: 44.22; 44.00; 43.74; 43.06

USD/CAD - 1.3241

 
Recent wave: Only wave v of c has ended at 0.9407 and wave C of major A-B-C correction is underway for headway to 1.4700

Trend:  Near term down

 
Original strategy       :

Sell at 1.3350, Target: 1.3130, Stop: 1.3410

Position: -

Target:  -

Stop: -

 
New strategy             :

Sell at 1.3350, Target: 1.3130, Stop: 1.3410

Position: -

Target:  -

Stop:-

The greenback found support at 1.3165 earlier this week and rebounded, retaining our view that consolidation above this level would be seen and recovery to 1.3330 cannot be ruled out, however, reckon 1.3360-65 would limit upside and bring another decline later, below 1.3220 would suggest the rebound from 1.3165 has ended, bring retest of this level but break there is needed to signal recent decline from 1.3794 has resumed for weakness towards 1.3100 and possibly towards previous support at 1.3078.

In view of this, would be prudent to sell again on subsequent recovery as 1.3350-60 should limit upside. Above previous support at 1.3387 (now resistance) would defer and suggest low is possibly formed, bring a stronger rebound to 1.3420-25 but break there is needed to provide confirmation. 

To recap, wave B from 1.3066 is unfolding as an a-b-c and is sub-divided as a: 1.2192, b: 1.2716 and wave c is a 5-waver with i: 1.1983, ii: 1.2506, extended wave iii with minor iii at 1.0206, wave iv ended at 1.0781 and wave v as well as wave iii has ended at 0.9931, hence the subsequent choppy trading is the wave iv which is unfolding as (a)-(b)-(c) with (a) leg of iv ended at 1.0854, followed by (b) leg at 1.0108 and (c) leg as well as the wave iv ended at 1.0674. The wave v is sub-divided by minor wave (i): 0.9980, (ii): 1.0374, (iii): 0.9446, (iv): 0.9913 and (v) as well as v has possibly ended at 0.9407, therefore, consolidation with upside bias is seen for major correction, indicated target at 1.3700 and 1.4000 had been met and further gain to 1.4700 would be seen later.

Daily Pivots: (S1) 1.1109; (P) 1.1168 (R1) 1.1205; More....

At this point, EUR/USD is still holding above 1.1109 support and outlook is unchanged. Intraday bias remains neutral with focus on 1.1298 key resistance. Decisive break there will carry larger bullish implication and target 1.1615 resistance next. On the downside, break of 1.1109 support will indicate short term topping and rejection from 1.1298. In such case, intraday bias will be turned to the downside for 1.0838 support.

In the bigger picture, the case for medium term reversal continues to build up with EUR/USD staying far above 55 week EMA (now at 1.0922). Also, bullish convergence condition is seen in weekly MACD. Focus will now be on 1.1298 key resistance. Rejection from there will maintain medium term bearishness and would extend the whole down trend from 1.6039 (2008 high). However, firm break of 1.1298 will indicate reversal. In such case, further rally would be seen back to 1.2042 support turned resistance next.

Daily Pivots: (S1) 1.2697; (P) 1.2746; (R1) 1.2803; More...

Intraday bias in GBP/USD remains neutral for the moment. Also, near term outlook stays bearish with 1.2977 resistance intact. We continue to favor the case that consolidation pattern from 1.1946 has completed at 1.3047 already. Decisive break of 1.2614 resistance turned support would confirm our bearish view and target a test on 1.1946 low next. However, break of 1.2977 will dampen our view and turn bias back to the upside for 1.3047 and above.

In the bigger picture, fall from 1.7190 is seen as part of the down trend from 2.1161. Price actions from 1.1946 medium term low are seen as a consolidation pattern, which could have completed after hitting 55 week EMA. Break of 1.1946 low will target 61.8% projection of 1.5016 to 1.1946 from 1.3047 at 1.1150 next. In case the consolidation from 1.1946 extends, outlook will stay remain bearish as long as 1.3444 resistance holds.

Daily Pivots: (S1) 0.9654; (P) 0.9694; (R1) 0.9749; More.....

USD/CHF is staying in range of 0.9613/9807 and intraday bias remains neutral, with bearish near term outlook. Break of 0.9613 will extend the whole decline from 1.0342 to 0.9548 support and below. We'd start to look for bottoming signal again as it approaches 0.9443 key support level. However, considering bullish convergence condition in 4 hour MACD, break of 0.9807 will indicate near term reversal and turn outlook bullish for 1.0099 resistance next.

In the bigger picture, USD/CHF is still bounded in medium term range of 0.9443/1.0342 for the moment. Consolidative trading would likely continue and medium term outlook remains neutral. Break of 1.0342 key resistance is needed to confirm underlying bullish momentum in the pair. Meanwhile, downside attempts should be contained by 0.9443 key support level. However, sustained break of 0.9443 will carry larger bearish implication and target 0.9 handle.

USD/CHF - 0.9744

Original strategy :

Buy at 0.9705, Target: 0.9805, Stop: 0.9670

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 0.9705, Target: 0.9805, Stop: 0.9670

Position : -

Target :  -

Stop : -

As the greenback has eased after surging to 0.9771 yesterday, suggesting minor consolidation below this level would be seen and pullback to 0.9720 cannot be ruled out, however, reckon support at 0.9703 would limit downside and bring another rise later, above said resistance at 0.9771 would extend recent rise from 0.9613 low to resistance at 0.9808, however, reckon previous resistance at 0.9825 would hold from here due to near term overbought condition, bring retreat later.

In view of this, we re looking to buy dollar on pullback as 0.9700-05 should limit downside. Below 0.9680 would defer and risk weakness towards said support at 0.9641 but only break there would abort and revive bearishness, this would also suggest the rebound from 0.9613 has ended instead, bring retest of this level later.

GBP/USD - 1.2777

Original strategy :

Sold at 1.2790, Target: 1.2690, Stop: 1.2800

Position : -  Short at 1.2790

Target :  - 1.2690

Stop : - 1.2800

New strategy  :

Hold short entered at 1.2790, Target: 1.2690, Stop: 1.2800

Position : - Short at 1.2790

Target :  - 1.2690

Stop : - 1.2800

Although the British pound retreated from 1.2818 to yesterday’s low at 1.2690, the subsequent rebound suggests consolidation would be seen, however, as long as 1.2795-00 holds, mild downside bias remains for another fall to 1.2680-90, break there would retain bearishness and signal the rebound from 1.2635 has ended, bring further fall to 1.2650, then towards said support at 1.2635.

In view of this, we are holding on to our short position entered at 1.2790. Only above said resistance at 1.2818 would defer and risk a strong rebound to 1.2845-50 (61.8% Fibonacci retracement of 1.2978-1.2635) but upside should be limited to 1.2870-80. 

EUR/USD - 1.1173

Original strategy  :

Sell at 1.1190, Target: 1.1090, Stop: 1.1225

Position : -

Target :  -

Stop : -

New strategy  :

Sell at 1.1210, Target: 1.1110, Stop: 1.1245

Position : -

Target :  -

Stop : -

This week’s selloff from 1.1296 signals top has been formed there and consolidation with downside bias is seen for this move to bring a strong retracement of recent upmove, hence further fall to previous support at 1.1109 would be seen, however, break there is needed to retain bearishness and extend further weakness to 1.1076 and possibly towards 1.1050 but price should stay above previous resistance at 1.1025. 

In view of this, we are looking to sell euro on recovery as 1.1210-15 (50% Fibonacci retracement of 1.1296-1.1132) should limit upside and bring another decline. Above 1.1230-35 (61.8% Fibonacci retracement) would defer and risk a stronger rebound to 1.1250 but price should falter well below said resistance at 1.1296, bring another decline later.

Daily Pivots: (S1) 109.81; (P) 110.39; (R1) 111.52; More...

Intraday bias in USD/JPY remains on the upside for near term channel resistance (now at 113.06). Sustained break there will suggest that whole pull back from 118.65 has completed at 108.12 already. In such case, further rise should be seen to 114.36 resistance for confirmation. Nonetheless, break of 108.81 will still extend the fall from 118.65 through 108.12 low before completion.

In the bigger picture, price actions from 125.85 high are seen as a corrective pattern. It's uncertain whether it's completed yet. But in case of another fall, downside should be contained by 61.8% retracement of 75.56 to 125.85 at 94.77 to bring rebound. Overall, rise from 75.56 is still expected to resume later after the correction from 125.85 completes.