General market theme
Strong dollar gains was the key market theme over the past 24 hours as the US currency managed to gain against its major rivals almost across the board. The dollar was higher against the euro and the pound as traders were repositioning their portfolios ahead of today’s high-profile event which is the US Retail Sales.
What is intriguing though is the fact that traders were buying dollars yesterday even though today’s report is expected to show a weaker Retail Sales report than last month, and there are also reasons to believe that the figures might actually come even lower than that. In that case, the dollar should dump most of its gains and push lower as its outlook will take a serious blow.
Price action highlights
The euro was quite active and volatile yesterday, starting the day in the red and pushing below the 1.1150 level, but during the course of the day it changed direction a couple of times and traded either side of this key level.
Today its flows will largely depend on the way the Retail Sales report will print. There are a few other euro-related reports pending for release, but we expect traders to focus their attention on the consumer spending figures from across the Atlantic, and fresh losses should bring the 1.1100 area into focus.
The cable also made a run to the downside over the past 24 hours and retested its recent lows below the 1.3000 area as the dollar enjoyed fresh demand ahead of the Retail Sales report. Traders expect the recent uptick in wage growth in the US to result to stronger consumer spending, but we have reasons to believe that there’s actually a chance that the figures will disappoint.
With the pound having formed a bottom around the 1.3000 area, a bounce higher looks possible. First target to the upside is the 1.3100 area and the recent highs there.
Focus of the day
The Eurozone Industrial Production and Gross Domestic Product reports will open the day today, but as we mentioned above the focus will be on the release of the US Retail Sales figures later in the day. The consumer spending report is expected to have a strong effect on dollar’s outlook, and the University of Michigan Confidence levels that will be released later will also be closely monitored by traders and investors.
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