Dollar to its lowest levels, EUR and AUD break yearly highest levels
The weaker than expected retail sales data sunk the Dollar on Friday. Doubts increased that the Fed would raise rates later this year. The Dollar Index (USD/DXY) fell 0.68% to 95.11 from 95.77. Wall Street stocks rose with the S&P 500 trading at all-time highs.
Oil and commodity prices ended higher. Brent Crude Oil rose to US$48.95 (US$48.43 Friday).
US June Headline CPI printed at 0.0% against a forecast of 0.1%.
US June Core CPI was 0.1% against an expected 0.2%.
US June Retail Sales fell for the second month running to -0.2% from May’s -0.1%. A rise of 0.1% had been expected.
US June Core Retail Sales print -0.2% from the previous -0.1% and a forecast of +0.1%.
US Industrial Production rose to 0.4% from 0.1%.
US Preliminary University of Michigan Consumer Sentiment Index – dropped to 93.1 from 95.1
EUR/USD – higher, closed at 1.1468 from 1.1398 Friday.
USD/JPY – fell to 112.52 (113.25 Friday). Yen shorts scrambled to cover
GBP/USD – stronger, breaks upwards to finish at 1.3105 from 1.2942 Friday.
AUD/USD – up on an overall weaker US Dollar and higher metals, ends at 0.7822 (0.7732 Friday)
Outlook: The Dollar Index (USD/DXY) fell to its lowest since last October, breaking the support at 95.50. This time the fall was broad-based as doubts on a third Fed rate hike in 2017 grow on benign inflation. There is little in the way of major US economic data in the week ahead. Markets will likely set their sights on the week’s main event which is the ECB Rates meeting on Thursday (July 20).
Data out today include:
China June Industrial Production, Retail Sales and Fixed Asset Investment as well as Q 2 GDP data (GMT 2 am, July 17/Local Time 12 pm, July 17)
Industrial Production – forecast 6.5% from the previous 6.5%
Retail Sales – forecast 10.6% vs previous 10.7%
Fixed Asset Investment – YTD to June – 8.5% against the previous 8.6%
Q 2 GDP (Annualised) – 6.8 % vs previous 6.9%.
Euro Zone Final Headline and Core CPI (Year-On-Year) – (GMT 9 am, July 17/Local Time 7 pm, July 17)
Forecast for the Final Headline CPI is 1.3%, unchanged from the previous 1.3%
Forecast for the Final Core CPI is 1.1%, unchanged from the previous 1.1%.
NZD June CPI Q/Q and Y/Y (GMT 10.45 pm, July 17/Local Time 8.45 am, July 18) the forecast for the Quarterly NZD Q2 CPI is 0.2% from the previous 1.0%. The Annualised NZD Q2 CPI forecast is 1.9% against the previous 2.2%.
Trading View: The Dollar is hanging in there by a thread. In early Asian trading we could see a gap lower in the Dollar Index (USD/DXY) to the next support at 94.90/95.00. Strong support comes in at 94.00. The latest CFTC/Reuters report saw speculators increase their net long USD bets for the first time in 3 weeks. Net speculative long US contracts increased to +USD 285.2 million from +USD 135.0 million. The increase is pretty hefty although most of that increase is due to a large increase in JPY and MXN shorts. Market positioning had an impact on the Dollar drop. Once again though it is the breakdown in the individual currencies that is of interest.
EUR/USD – extended gains to close at 1.1468 from 1.1398 Friday, up 0.43%. There is immediate resistance in the Euro at 1.1490-1.1500. Near term support is now at 1.1430. The Euro has had difficulty breaking higher against the USD all week. Last Friday its rise was the smallest amongst the Majors against the Dollar. We can see why through the market positioning. Likely range today 1.1420-1.1490. Would still look to sell rallies to 1.1500.
USD/JPY – The Dollar weakened against the Yen breaking through strong support at 112.80, closing at 112.50. Immediate support lies at 112.20. There is resistance at 112.80 (the previous support level. Given the current weak USD environment and market positioning, we should see USD/JPY drift lower. Likely range 111.80-112.80.
GBP/USD – Sterling strengthened as trader scrambled to cover shorts. Once GBP/USD broke above 1.3000 we can see a big gap upwards in the charts. Trading volume in the Pound always thins out when there is a gap and the movements are more pronounced. Short term support lies at 1.3050 and then at 1.3010. Tomorrow sees the release of UK June inflation data. Likely range today 1.3070-1.3120.
AUD/USD – soared to finish up 1.014% at 0.7825. The Australian Dollar was a star performer and benefited once again from a weaker Dollar overall and strong industrial metals. Immediate resistance lies at 0.7840 (overnight high was 0.7834). There is good support at 0.7760 and then 0.7720. A bit of caution up here with today’s likely range 0.7770-0.7840.
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***Information contained in this news letter are gathered from third parties and should not be regarded in any way as trade advice or recommendations by CM Trading. CM Trading does not recommend or advise traders or investors in their decision making, but merely provides information from the market for its clients as additional information being made available as per the events occurring in the financial markets.
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