Today we will look to US Retail Sales and UK Inflation report for further clarity and maintain a minimum risk stance, with small USD longs vs EUR, GBP and JPY.
{EU} EURUSD Lower=> Predicting the direction of EUR/USD is proving difficult in the extreme. All of which makes today’s US retail sales release all the more important in the hope that it tips us in one direction. Key levels for the session are: resistance at 1.1270, then 1.1290 (NFP high); support towards yesterday’s 1.1131 low.
{GB} GBPUSD Higher=> Today’s inflation report and the build-up of positioning makes the risks for a relatively dovish outcome as asymmetric and we have reduced GBP length accordingly to be in a position to buy dips. Levels: 1.5600 first support area below the 200dma with 1.5523 more developed support (post-election highs), very little topside until the 50% retracement at 1.5879.
{JN} USDJPY Higher=> Our focus today will be firmly on retail sales where we believe the risk is skewed higher after the recent USD washout elsewhere in the market: 119.50 should be good support level, with resistance at 120.50.
Citi: Retail sales brief summary of Steven Englander expectations :
The tails on today’s retail sales release are much more important than usual. The reason is that the question marks around the US economy centre on consumption and GDP growth and retail sales is the release most directly feeding into these calculations:
1) Will US GDP rollover on its own forcing the Fed to debate easing when rates are zero and QE4 would be very politically difficult?
2) Will US GDP bounce back vigorously, making it clear that Q1 was an aberration and putting us back on track for lift-off?
Focus in particular on CORE number : The consensus is looking for 0.5%, Citi economists 0.4%. We reckon that it would take 0.8% to really convince investors that the bounce back was real.
The tails on today’s retail sales release are much more important than usual. The reason is that the question marks around the US economy centre on consumption and GDP growth and retail sales is the release most directly feeding into these calculations:
1) Will US GDP rollover on its own forcing the Fed to debate easing when rates are zero and QE4 would be very politically difficult?
2) Will US GDP bounce back vigorously, making it clear that Q1 was an aberration and putting us back on track for lift-off?
Focus in particular on CORE number : The consensus is looking for 0.5%, Citi economists 0.4%. We reckon that it would take 0.8% to really convince investors that the bounce back was real.