The US Dollar was in focus yesterday for yet another session as market participants and analysts were waiting for the release of the Retail Sales report to dictate price action. Expectation were set for a strong and bullish Retail Sales report that would support Fed’s tightening agenda and the actual levels that printed didn’t disappoint revealing an encouraging rebound in consumer demand in the US.
As a result the Dollar gained against its European peers driving the Euro and the Cable lower intra-day, even though the UK currency was able to recover part of its losses overnight. Truth be told the Retail Sales report was another sign of progress from the US domestic economy but the really important event that will decide Dollar’s medium term outlook will take place next week with the FOMC meeting on interest rate policy.
Taking a look at the majors’ technical outlook, the Euro dipped to 1.1200 yesterday on the back of the Retail Sales report and we believe that it becomes clearer now that the Single currency will find it hard to overcome the 1.1400 resistance. The momentum point downwards after the recent string of encouraging Dollar-related reports from the US and at the same time the stalemate between Greece and its creditors doesn’t help. During the last session of the week we don’t expect too much volatility given that there are no scheduled events or reports so we could see the Euro hovering between 1.1250 and 1.1180.
The Cable came under pressure initially yesterday after the release of the Retail Sales report but the currency managed to recover during the rest of the day and recapture the 1.5500 level. The outlook for this pair is mixed at this point, the Dollar is enjoying a renewed surge of momentum while at the same time investors and traders are not ready to abandon the Pound. We believe that we will see further volatility next week and for the Cable to move to the downside a clear break of yesterday’s 1.5430 lows will be required.
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