(Bloomberg) -- U.S. lumber futures are set to snap an eight-session losing streak as traders who bet on price declines cashed in ahead of Wednesday’s U.S. housing starts report.

Traders betting against lumber sold off short positions in futures contracts on expectations that the key housing report will show a steady number of homes were built in the U.S. in May, said Brian Leonard, an analyst with RCM Alternatives in Chicago.

“We are $800 from the highs, so a steady report would bring shorts out of the market,” Leonard said.

The price of lumber for July delivery rose 2.4% in Tuesday afternoon trading in Chicago, reversing earlier declines that had the contract on pace to record its longest slump since 2016.

Economists surveyed by Bloomberg expect U.S. housing starts to rise 3.9% in May from the previous month to reach 1.63 million on an annualized rate. Demand for homebuilding remains strong, which will likely keep lumber prices historically high.

“New homebuilders are still building because demand is high,” said Paul Jannke, principal at Forest Economic Advisors, a wood product analysis firm. He sees prices stabilizing at between $500 and $1,000 per 1,000 board feet, well above historical averages.

Lumber futures rose to $1,019.90 per 1,000 board feet on Chicago Mercantile Exchange at 2:27 p.m. local time, after swinging between losses of as much as 5.3% and gains as high as 6.3% through the trading day. Lumber futures hit a record $1,733.50 on May 10.

U.S. builder confidence for single-family homes in June dropped two points to a 10-month low due to rising material prices and supply chain shortage, the National Association of Home Builders/Wells Fargo Housing Market Index showed Tuesday. Still, the index’s reading at 81 -- down from 83 in April and May -- signals strong housing demand due to low U.S. inventories.

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