New housing starts fall on lumber

US Housing Starts for April were much worse than expectations, coming in at an annualized rate of 1.569M vs an expectation of 1.71M and a revised 1.733M in March. This turns out to be -9.5% for April vs -2.8% expected after a revised 19.8% in March! Could this be the beginning of worse than expected housing data for the month of April? On Friday, the US will release existing home sales for April. Next Tuesday, the US will release New Home Sales and next Thursday the US will release Pending Home Sales. Today’s data was expected to be weaker than that of March, however, it wasn’t supposed to be this poor. Why weren’t houses being built during April? The most obvious place to look is to the price of lumber.

What are economic indicators?

Lumber

The price of Lumber has been rising since June 2020, however during the month of April, price went parabolic, moving from 1006 on April 1^st to 1502.3 on April 30^th, an increase of nearly 50%. Prices reached a high of 1711.2 on May 10^th. Then: “TIMMMMMMMBBBBBEEEEERRRRR” Price fell from the highs to today’s lows near 1264, a move of 447.2, or just over 26%! Horizontal support is just below at the April 21^st lows near 1243.7.

Source: Tradingview, City Index

On 240-minute timeframe, notice how the RSI signaled there could be a change ahead as it diverged with price. (However, that was quite a move before price actually turned). Price closed Tuesday just below the 50% retracement level from the March 17^th lows to the May 7^th highs, at 1264. The 61.8% Fibonacci retracement below the April 21^st lows is the next level of support at 1168.8. Horizontal support beneath that is all the way down at 1030.3. There is some horizontal resistance near 1481.5, and then just above there at the broken trendline near 1500. After that, price can run all the way back up towards the all-time highs.

Source: Tradingview, City Index

(Note that we can’t create Fibonacci retracements from the high to the current low because we don’t know where the low is for this move yet)

With the move higher in lumber in April, housing starts were worst than expected. We’ll find out later in the week and next week if the higher lumber prices were passed through consumers buying new homes, and even existing homes! But with prices moving lower in lumber this month, the data for May could be stronger!

Learn more about commodity trading opportunities.

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.