US housing starts dropped more than expected last month, official figures revealed on Tuesday. According to the US Department of Commerce, housing starts declined 5.8% to a seasonally adjusted annual pace of 1.14 million units in August, following the preceding month's 1.21 million-unit rate and falling behind the 1.17 million-unit pace market forecast. Starts of single family houses declined 6.0% to a 722,000 unit rate in August, the lowest level since October of 2015, whereas housing starts for the volatile multi-family segment dropped 5.4% to a 420,000 unit pace.
In the meantime, building permits plunged 0.4% in August to a seasonally adjusted rate of 1.14 million units as approvals in the volatile multi-family segment fell 7.2% to a 402,000 unit-pace, whereas permits for single–family homes jumped 3.7% to a 737,000 unit-rate last month. Market analysts expected permits for future construction to hit 1.17 million units in the reported month. In regional terms, single-family new house construction building permits fell in both the Northeast and South 13.8% and 13.1%, respectively, but increased in the West and Midwest. After the release, the US Dollar fell slightly, trading at 1.1182 against the Euro, 1.2967 against the British Pound and 101.83 against the Japanese Yen.
UK Public Sector Net Borrowing and Fed's Interest Rate Decision
GBP/USD: key support in focus
Even poor US Building Permits yesterday could not provide the GBP/USD with sufficient strength to keep the pair from falling back under 1.30. With the breach of this major level the Cable falls under the risk of edging lower towards the key support area around 1.2885. This level is important, as not only the weekly S1 coincides there with the monthly one, but also with the support line, which kept the Sterling elevated since its sharp post-Brexit slump. Technically, a decline should be limited by this cluster of supports today; not only that, but an anticipated Fed's dovish statement could also be a catalyst for the exchange rate to negate Tuesday's losses.
Daily chart
Hourly chart
Traders remain undecided
Bulls are barely outnumbering the bears, as 53% of all open positions are long. The portion of buy orders, however, surged from 39 to 65%.
A different situation is observed elsewhere. For example, 67% of positions open at OANDA are currently long. This is more than the share of shorts (33%), sufficient for the sentiment to be called bullish. Similarly, sentiment at Saxo Bank is also bullish, with 69% of traders being long and 31% being short the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders expect no major changes
By the end of the next three months traders expect the Cable to be more or less at the same level where it is now. While the current price is around 1.30, the average forecast for December 21 is 1.3172. Interestingly enough, however, the 1.30-1.32 interval is not the most popular one, along with 1.34-1.36 and 1.24-1.26, having only 10% of the votes each. Most of the votes are concentrated in 1.28-1.30 (15%) and 1.36-1.38 (14%) intervals.