Further correction for the European majors against the US Dollar was the theme of the market over the past 24 hours as we draw near the end of the week. As we have mentioned in our reports this week the most important and anticipated event of this trading week is the release of the US Retail Sales levels which is scheduled for today and can again turn the tables on the recent price action in the majors.
For the past 4 trading days the Dollar has seen a consolidation and a correction lower after the strong reaction the previous week after the release of the NFPs. Traders realize that the Fed could move forward and raise rates in December but also understand that for that to take place every single piece of US data needs to be bullish between now and then. As such they have assumed a more reserved stance during this week which has resulted into the Dollar giving up small losses against the Euro and the Pound.
The Euro was on focus yesterday as ECB President Mario Draghi testified to the European Parliament and the marker expected him to reiterate the central bank’s intentions to ease further if necessary. However he avoided to mention such plans and even though the Euro received some initial support it then lost all momentum and finally settled around the 1.0800 area.
Today’s US Retail Sales report can really send the Euro either way depending on the way it will print, a strong reading as expected from the market should send the Single currency towards the 1.0700 area as traders will receive confirmation that the Fed is on course to raise rates. However a cooler than expected reading could allow the Euro to extend its recent gains and make an effort to rally towards the 1.0900 area so we need to be careful and wait for the report to drive the price action.
The Cable on the other hand remained flat for the entire session yesterday capped below the 1.5250 level as there have been no UKJ or US-related news in the last 24 hours. The Pound has been strong during recent sessions especially after the release of the UK employment figures and has established a base above the 1.5200 support area. Today’s US Retail Sales report will either propel the currency towards the 1.5300 area if it disappoints Dollar traders or will force the UK currency to withdraw below the 1.5200 support area targeting lower levels.
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