General market theme
The US dollar was in the centre of attention on Friday as investors were expecting the US Retail Sales figures in order to better assess the outlook of the domestic economy and along that how bullish should the Fed be. As we mentioned in our report on Friday the consumer spending report was expected to print a bearish manner but there was room for a surprise to the upside which indeed took place. The actual release printed significantly higher showing good consumer activity in the US during the past month and investors reacted by adding to their pro-dollar positions. The US currency gained across the board with the likes of the euro and the pound giving up their recent highs.
Price action highlights
The euro pushed lower dropping below the 1.1100 support area on the back of the advancing dollar and the currency reached the 1.1020 lows before the day was out as the US currency took control of the flows. We know that the Fed is in no place to raise rates after the recent market volatility but the positive progress of the US economy along with rumors that the ECB is planning to ease further soon are creating a bearish outlook for the single currency and we could expect further losses this week should the dollar remain in control.
The cable gave up its recent gains on the back of the stronger retail sales report from the US and the currency dropped from the 1.3500 area to trade as low as almost 1.3100 on the back of dollar’s advance. The bias has been negative for the pound and we have warned our audience that the UK currency was a selling opportunity while it traded at these highs and after the reversal took the rate considerably lower we could see even more losses this week should the dollar continue to attract further flows.
Focus of the day
The calendar for the day ahead is empty of anything of importance and only holds tier-3 reports that will not affect the price action. We expect traders to continue on the same tempo as on Friday with the dollar attracting fresh attention but with investors having to assess whether this fresh news is enough to support the currency’s outlook enough in order to advance further.
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