Aussie Housing Data a shock

The only important economic data as of this morning has been the release of the HIA New Home Sales.It was expected to come out around 8.2% for the month of July but what we got was a shocker at -9.7%. The Aussie home sales have always been very strong over the past few years and this piece of economic data has generally been very volatile. So, as expected, the data was brushed aside and it had very little impact on the Aussie dollar.

It has been an interesting start to the week once again with the Nikkei up by more than 2% as of this writing. The underlying theme has been the strength of the USD against all currencies including the pound and the yen. The reason for this strength has been the statement from the Fed Chief Yellen who has hinted that the conditions are becoming more and more favourable for a rate hike. The market has interpreted this as an indication of a rate hike in September.

We continue to maintain the stand that the first rate hike can be expected only early next year. September is very close to the November elections and no one would like to rock the boat at that time. The other month that the market believes to be conducive for a rate hike is December but in general, December is a big holiday in the US with low liquidity in the markets and we don’t think anyone would like to tamper with the markets at that time. So, the earliest that we expect a rate hike is early next year. But, so far, the market believes otherwise and hence the strength in the USD.

We expect a little correction during the course of this week and once the market settles down to reality, we should expect a bigger correction. But, going into the year end, we should see some more USD strength.

An interesting weekly chart has been that of Gold. It has weakened considerably over the past week or so and it is getting near some strong supports at 1313 and then at 1295. We expect a good bounce from 1313 and then from 1295 (if it reaches there) and these might be good points for us to go long, depending on the price action at these support points.