Volatility in the currency markets remained elevated yesterday as traders were focused on the release of the UK Retail Sales while keeping an eye out for any developments in Greece. Price action was very interesting especially on the Cable that had to react to the sudden surprise of a bearish Retail Sales report while the Euro was on the rise as the Greek Parliament approved the second round of measures dictated by the Eurozone.
Starting with the Cable that has been increasingly volatile over the last week, the UK currency was on everyone’s focus as the Retail Sales report was supposed to help extend the rally towards higher levels. However the report printed surprisingly lower cancelling any hopes traders had for a renewed rally on the Cable, hopes that were made clear when the currency started climbing higher before the actual release but quickly reversed its flows and retreated.
Traders that had built up long positions on the Cable waiting for a strong printing of the consumer-related report abandoned them quickly and as a result the UK currency lost the 1.5600 level and ended the day hovering just shy of the 1.5500 support area. The disappointing report has taken some of the excitement away from the Pound that has been supported from different fronts over the past few days but it doesn’t change its broader outlook that remains relatively bullish.
The Euro on the other hand was able to edge higher on an attempt to capitalize on the quiet day for the US Dollar. The Single currency re-tested the 1.0900 level of support on Wednesday and yesterday attempted another relief rally that led it to the 1.1000 area where it met increased resistance. We discussed earlier in the week how the Euro could make an effort to correct a bit higher and we believe that this attempt will conclude its gains.
There are a couple of reports today from Germany and the Eurozone that could allow the Euro to attempt to overcome the 1.1000 barrier should they print in a positive manner but the broader sentiment is pointing lower and next week we should be able to see a stronger Dollar that will push the Euro towards its previous lows.