A Drop In U.S. Housing Starts Would Confirm Bullish Dollar Technical Outlook

Daily Forex Technicals | Written by DailyFX | Feb 18 09 05:50 GMT |

Fundamental Outlook U.S. housing starts are expected to have declined to fresh record low of 530,000 in January from 550,000 the month prior. New construction has dried up as the lack of demand due to tight credit markets and the glut of existing homes for sales. Although we have started to see the market work through some of the inventory and the declining contributions of new home to those totals will only help. However, the U.S. economy may not be able to see a rebound in growth until home builders see an incentive to increase activity which will add jobs and increase demand for materials. The dour report will add to the prevailing pessimism which may increase risk aversion and add to current dollar strength. This would confirm the bearish euro/dollar technical outlook which is calling for the pair to test support at 1.2378. I wrote yesterday that 'the bottom line is that a corrective advance is due soon. Whether or not 1.27 is broken before the advance begins is another question. Dropping below 1.27 would complete a small 5th wave in a terminal thrust from a triangle. Bigger picture, the next leg of the multi year bear is underway from 1.47. A countertrend rally is expected and initial resistance is at 1.33.' 1.27 broke, the floodgates opened, and price is now below 1.26. Chart support is not until the October low at 1.2327. There is measured support at 1.2378; which is the 161.8% extension of 1.3077-1.2719/1.2947 DailyFX Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.