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Friday, June 14, 2019

US Retail Sales comes in mixed for May, but with surprise positive revisions to April data.

US Retail Sales comes in mixed for May, but with surprise positive revisions to April data.
Source: Powered by Exchange Bank of Canada – www.ebcfx.com/news

 

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SUMMARY

Fed rate cut frenzy trade gets dialed back.  Gold, bonds, Eurodollar off highs.  USD broadly higher.
Pressure mounts for ECB to cut rates too as 5y5y inflation swap forwards trade to new lows < 1.14%.
German bunds trade to new lows (-0.27%).  EURUSD now breaking chart support at 1.1240s.
GBP traders nervous about Boris Johnson’s unwillingness to completely remove no-deal Brexit risk.
AUDUSD follows NZDUSD lower in Asia, now follows EURUSD lower after upbeat US Retail Sales.
US Industrial Production for May beats expectations: +0.4% MoM vs +0.2%.

 

ANALYSIS

USDCAD

Dollar/CAD sits slightly atop chart resistance at the 1.3330 this morning as the USD gets bought broadly in Europe.  Today’s move feels EURUSD driven and we suspect that’s because Eurozone inflation expectations and bond yields continue to fall to new record lows (Euro 5y5y inflation swap forwards <1.14%, German bunds < -0.27% and Spanish 10s < 0.5%).  The US Retail Sales report for May just came out and the numbers were slightly better than expected: +0.5% MoM vs +0.6% on the headline (miss), +0.5% vs +0.3% ex autos (beat), but with across the board positive revisions to the April data.  This is seeing the USD broadly extend its overnight gains and it’s seeing the feverish Fed rate cut trade dial back some of their enthusiasm (gold now +8 after being +15 earlier and December Eurodollar interest rate futures now at implied 1.97% Fed funds vs 1.90% earlier).  We think the 1.3330s will be the pivot for price action heading into the weekend, with gains likely to continue to the 1.3370s should traders keep the market above it.  A move back below would be near-term bearish.

 

USDCAD DAILY

USDCAD DAILY

USDCAD HOURLY

USDCAD HOURLY

JUL CRUDE OIL DAILY

JUL CRUDE OIL DAILY

 


 

EURUSD

Euro/dollar is feeling more pain this morning as the markets now put pressure on the ECB to cut rates as well.  Mario Draghi has said that the ECB’s preferred measure of medium term inflation expectations is the 5y5y forward swap rate, and right now that rate is falling hard to new record lows below 1.14% (this is the market’s expectation of what inflation will be starting in five years time and ending in 10 years time).  When you combine this with German and Spanish 10 year yields trading at new lows this morning, it’s not surprisingly frankly to see EURUSD pushing lower here.  Yesterday’s breach of chart support in the 1.1280s and this morning’s failure to regain the level haven’t been helpful, if we look at the technicals.  Losses are extending here now as the US reports decent Retail Sales for May with upward revisions to the April data.  Chart support in the 1.1240s is getting tested, and the next level below that lies in the 1.1210s.  We think this news now muddies the Fed rate cut excitement for next week a little bit and is leading traders to consider the thought that the Fed doesn’t materially change its “on hold, patient, no rush to do anything” guidance.

 

EURUSD DAILY

EURUSD DAILY

EURUSD HOURLY

EURUSD HOURLY

AUG GOLD DAILY

AUG GOLD DAILY

 


 

GBPUSD

Sterling is trading down this morning as traders follow EURUSD lower.  Markets also appear to be on edge following various comments from Tory front-runner Boris Johnson about not completely taking a “no-deal Brexit” off the table as an option, and he’s actually trying to dial back some of this rhetoric as we speak.  The decent US Retail Sales report is now seeing another wave of GBPUSD selling come in, and this now threatens trend-line chart support in the 1.2610-20s.  A move below this level could spark a wave of sell stop sales into the 1.2580s we feel.

 

GBPUSD DAILY

GBPUSD DAILY

GBPUSD HOURLY

GBPUSD HOURLY

EURGBP DAILY

EURGBP DAILY

 


 

AUDUSD

Australian dollars traders are hitting the sell key yet again today.  The Asian session move below chart support at 0.6900-0.6905 appeared to be NZDUSD driven, after New Zealand reported a poor manufacturing PMI number for May, and the early NY move lower here comes after the slightly better than expected US Retail Sales data.  The next support zone lies in the 0.6860s to 0.6880s.  We think the entrenched AUDUSD fund short position will feel emboldened here heading into the Fed meeting next week.

 

AUDUSD DAILY

AUDUSD DAILY

AUDUSD HOURLY

AUDUSD HOURLY

JULY COPPER DAILY

JULY COPPER DAILY

 


 

USDJPY

Dollar/yen is popping higher post US Retail Sales as the Fed rate cut trade takes profits (gold, bonds, Eurodollar interest rate futures all lower).  The USD is broadly benefitting as well, and with that USDJPY is threatening a break above downward sloping trend-line resistance that has been capping the market for two days (108.40-50s).  We think the market could stage a mini-rally here should interest rate traders have 2nd thoughts about their bets for the Fed meeting next week.  A NY close above 108.50 could open up the door to gains into the high 108s.
 

USDJPY DAILY

USDJPY DAILY

USDJPY HOURLY

USDJPY HOURLY

DEC 3-MONTH EURODOLLARS DAILY

DEC 3-MONTH EURODOLLARS DAILY

Charts: TWS Workspace


About the Author

Erik Bregar

Erik Bregar - Director, Head of FX Strategy

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Erik works with corporations and institutions to help them better navigate the currency markets. His desk provides fast, transparent, and low cost trade execution; up to the minute fundamental and technical market analysis; custom strategy development; and post-trade services -- all in an effort to add value to your firm’s bottom line. Erik has been trading currencies professionally and independently for more than 12 years. Prior to leading the trading desk at EBC, Erik was in charge of managing the foreign exchange risk for one of Canada’s largest independent broker-dealers.

Interested in creating a custom foreign exchange trading plan? Contact us or call CXI's trading desk directly at 1-833-572-8933.

 

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Posted By Mandee Myers at 08:15 AM
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