Australian Building Approvals get a Boost

Underlying USD strength continues to be the theme for the markets and this will continue to be so till the end of the year atleast. There will be periods of correction to this strength but this will be the trend for the forthcoming months.

In morning FX related news today, Aussie building approvals jumped to +11.3% for July against the expected +1.1%. Of course, if this continues for the next few months (as has been the trend for the whole of this year), we could see supply exceeding demand in certain areas and this could mean a correction in housing prices which would be great news for those who want to buy new houses/apartments.

Nearer to Asia, in Japan, we saw the overall household spending to be -0.5 for July y/y against the expected -1.5%. Just some cheerful news on the Japanese economy but this is definitely not something that will move markets. USDJPY continues to sit around 102.

Technically, the euro and the pound tried to correct some of the USD strength but they largely failed. London was on holiday yesterday and they are back today and it should be something that is interesting to watch for the day. But with USD strength being the theme for the most part and the other currencies finding it difficult to progress against the USD, estinations are for further fall in EUR/USD and GBP/USD. Of these 2 pairs, the euro has been generally stronger ever since Brexit happened and we believe that with the weak pound, it becomes very important for the banks to keep the euro propped up. So, we prefer shorts on the pound and this is supported by the charts(see below). We have plotted the fibo for the Brexit drop and we see that the price has failed against the 23.6% of the fibo and dropping. We expect GBPUSD to touch 1.29 atleast, considering the strength of the USD.