US retail sales boost USD

The USD got a boost yesterday from the release of the US retail sales growth rate for January as the rate got out of the negatives and accelerated beyond expectations reaching 3.0% mom. Also, we note that the New York Manufacturing index for February improved more than expected implying an improvement of economic activity in the wider NY area while the industrial production growth rate for January rose yet failed to reach market expectations. The releases tended to ease market worries for a possible recession in the US economy, while in conjunction with the elevated inflation data for January released yesterday tend to imply that the Fed’s hawkish stance is to be maintained. Please note that gold’s price retreated as a result of USD’s strengthening and the rise of US yields is not helping either. US stock markets tended to edge a bit higher as recession worries eased, yet today we turn our attention to European stock markets with the release of Commerzbank’s, Renault’s and Airbus’s earnings reports. Back in the FX market and across the Atlantic we note that UK’s CPI rates slowed down more than expected for January which tended to ease market worries for BoE’s hawkishness and drove the pound lower.

In Australia the release of January’s employment data tended to disappoint Aussie traders, pushing AUD lower as the employment change figure improved, yet failed to get out of the negatives and the unemployment rate rose to 3.7%. The release implied that the tightness of the Australian employment market is easing and may cause RBA to have second thoughts about its monetary policy tightening. In the commodities market, we note that WTI’s price edged higher, despite a surprise huge increase of 16.2 million barrels in US oil inventories being reported by EIA for the past week. The market seems to have shrugged off the release as such and hopes for a possible increase in oil demand from China seem to be building up and driving the commodity’s price higher.

GBP/USD dropped yesterday further aiming for the 1.1925 (S1) support line yet corrected higher. Yet given that the pair’s downward movement broke the upward trendline guiding it, we switch our bullish outlook in favour of a sideways motion initially. Should the bulls take over, we may see cable breaking the 1.2115 (R1) resistance line and aim for the 1.2270 (R2) level. Should the bears be in charge, we may see the pair reversing course, with the 1.1925 (S1) support line being the first possible stop for the bears, while should the S1 be broken, the way would be paved for the 1.1740 (S2) support level.

USD/JPY was on the rise yesterday aiming for the 134.80 (R1) resistance line, yet the bulls seem to have some hesitations. Nevertheless, we maintain a bullish outlook for the pair as long as the upward trendline incepted since the 10^th of February remains intact. Should the ascent higher be maintained we may see USD/JPY breaking the 134.80 (R1) resistance line and aim for the 138.15 (R2) level. Should a selling interest be expressed by the market we may see USD/JPY breaking the prementioned upward trend line in a first signal of a changing trend, breaking the 131.40 (S1) support line, thus opening the gates for the 128.60 (S2) level.

Other highlights for the day:

During today’s European session, we note the release of Turkey’s FX reserves while ECB board member Panetta is scheduled to speak. In a packed American session, we note the release from the US of the building permits for January, the number of housing starts for the same month, the weekly initial jobless claims figure, Philly Fed’s business index for February and the PPI rates for January. On the monetary front we note that Cleveland Fed President Mester, BoC Governor Tiff Macklem, BoE Chief economist Pill, St. Louis Fed President Bullard, ECB Vice President De Guindos and Fed Board Governor Cook are scheduled to speak. We note that during tomorrow’s Asian session, RBA Governor Philip Lowe and Cleveland Fed President Mester are to make statements.   

GBP/USD H4 Chart

Support: 1.1925 (S1), 1.1740 (S2), 1.1565 (S3)

Resistance: 1.2115 (R1), 1.2270 (R2), 1.2465 (R3)

USD/JPY H4 Chart

Support: 131.40 (S1), 128.60 (S2), 126.40 (S3)

Resistance: 134.80 (R1), 138.15 (R2), 140.60 (R3)

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