The September U.S. housing starts report undershot estimates with a 4.7% starts drop that reflected a big hit from Irma, alongside a 4.5% permits drop that reversed surprising August strength, and a small 1.1% completions bounce. The weather played a big part in the weakness. Weakness across measures was concentrated in the south, which includes both Florida and Texas, and reflected drops in both the single and multi-family segments. We did see an encouraging 0.3% rise in starts under construction after a 1.1% (was 1.3%) August rise, and hence a firm Q4 figures despite the disappointing close for Q3 is expected.
The US dollar edged slightly lower after the weak housing starts figures, leaving EURUSD up to 1.1775, and USDJPY at 112.76 from 112.91. U.S. equities are all bulled up after solid earnings report from IBM, along with positive guidance, shrugging off the slump in housing starts and rapidly rising market yields.
Meanwhile USDCAD fell to 1.2485 lows from 1.2531 after the weak US data but especially after the stronger Canadian manufacturing data, though has since found support into the 20-day moving average of 1.2465. Canada manufacturing shipments grew 1.6% in August following a 2.6% drop in July. The increase in August shipments was much larger than expected driven by a 8.2% surge in transportation equipment and a 3.2% improvement in petroleum and coal shipments that was largely due to higher prices.
The pair is in an uptrend since early September, with a consolidation seen between 23.6 and 38.2 Fibonacci level on October and hence a Strong support level at 23.6 Fib. at 1.2425 and a more immediate support at 20-Day MA which supports the pair very well. Firmer oil prices seems to limit upside going forward of the pair.
However focus is now onward to the weekly EIA inventory data at 14:30 GMT. The API reported a larger than expected 7.1 mln bbl draw in U.S. inventories on Tuesday, which has helped support oil prices.
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