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Could optimism in UK homebuilders last?
Taylor Wimpey (+5.25%) and Rightmove (+5.75%) performed better than estimates in the first half of 2016.

As the UK’s real estate market came under decent negative pressure following the UK’s decision to leave the European Union, Taylor Wimpey’s CEO warned that the ‘market’ – sitting in London, could have a distorted view regarding Brexit-related damages on the overall housing industry. “The London-centric view doesn’t reflect the entire business”, he said.

Still, investors could remain shy of UK real estate shares given that the risks of recession are difficult to assess in the short term, concerns could materialise gradually over time, and still, London is a significant part of the housing business in the UK and growth outside London could not be sufficient to maintain the pre-Brexit uptrend. Uncertainties will certainly keep the UK’s housing market at distressed territories until we have more clarity on Brexit-related capital and human flows.

Taylor Wimpey shares dropped 40% after the UK voted to leave the European Union, however the market remains on the buy side of the game: 59% of brokers prefer to be in long positions and 35% prefer to hold Taylor Wimpey in their portfolios with twelve-month price target of 180p.

The picture is less rosy for Rightmove, with only 37% of brokers recommending buying the stock, while 58% remain on hold with a twelve month target price at 4076p, lower than the current levels.

AUD and JPY traded on monetary bets

The inflation in Australia accelerated 0.4% q/q in the second quarter. The Aussie rallied in Sydney, as expectations of further monetary stimulus from the Reserve Bank of Australia (RBA) weakened, yet not enough to keep the Aussie trending higher above the 200-hour moving average, 0.7515, against the US dollar. There is currently a 50-50 chance for the RBA to cut rates at the August meeting. It will likely be a live decision. Yet, the market remains comfortably short Aussie; RBA-doves could see opportunity in selling the rallies.

The yen continues swinging up and down on every piece of information that could feed into speculations about additional fiscal and monetary stimulus. According to the latest news, Japanese PM Shinzo Abe said that the fiscal stimulus could be more than 28 trillion yen, including 13 trillion yen in low-interest loans.

The Bank of Japan (BoJ) could also expand monetary stimulus by the end of this week. Now that the market sees the monetary easing as granted, the size of the stimulus will be decisive for the direction the yen will be taking.

The USJDPY rallied to 106.54 in Tokyo. For traders willing to take advantage of the recent bullish reversal on the run up to the BoJ’s policy announcement, there could be an opportunity in buying at dips above the 105.30, major 38.2% retracement on rebound, for a potential extension toward the 100-day moving average, 107.00. Support is eyed at the 104.00/104.60 area.