US Retail Sales comes in mixed for May, but with surprise positive revisions to April data.
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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.
JUL CRUDE OIL DAILY
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.
AUG GOLD DAILY
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.
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.
JULY COPPER DAILY
DEC 3-MONTH EURODOLLARS DAILY
Charts: TWS Workspace
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