Lumber price hit its all-time high of $1,733.50 per 1,000 board feet in May 2021as lockdowns pushed more people to renovate their homes and restaurants to establish outdoor dining spaces. Low borrowing rates also heightened demand for housing in the US.
However, as governments eased lockdown measures, the trend shifted to travelling and engaging in outdoor activities; an aspect that pushed lumber price down by over 70% in August.
Notably, the commodity is back on its rallying, trading steadily above the psychologically crucial level of 1,000 for over a month now. Since the beginning of November when it was trading below the support level of 600, lumber futures on the Chicago Mercantile Exchange (CME) have rallied by 108.80%.
Housing demand is one of the drivers of the ongoing rally. Data released by the Census Bureau on Wednesday showed that housing starts in 2021 were at the highest level since 2006. The recorded housing starts and building permits of 1.7 million and 1.87 million surpassed November’s 1.68 million and 1.72 million respectively.
On the one hand, higher mortage rates may curb housing demand in 2022. However, the growing number of millenials who are shifting from student loans to mortgages and striving to own a home will likely continue to support demand in the US housing sector and lumber price by extension. Besides, the ongoing supply chain challenges are expected to continue boosting the commodity in the short term.
On a four-hour chart, lumber price is trading along the 25-day EMA and above the 50-day EMA. At the time of writing, it was at 1,233.70 following a pullback from the over 7-month high of 1,339.00 that it hit in the past week.
Amid the bullish outlook, it may continue to find support along the 25-day EMA at 1,228.10 as the bulls gather enough momentum to retest June’s high. Past the aforementioned resistance level, the bulls will have an opportunity to push lumber price to the upper target of 1,400. However, this thesis will be invalidated by a move below the 50-day EMA at 1,149.8.
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