Major money markets had a smoother session over the past 24 hours compared to what we have become accustomed to during this week and even though we saw attractive price action there was a set direction on it. Both European majors had more gains to show against the Dollar but by the end of the day and overnight we noticed a slight retreat on both of them.
Is that a precursor on what to expect today? It might, as the focus now turns on the release of the US Retail Sales report that could either revive Dollar’s rally against its peers or add more pressure on the US currency to retreat further. Expectations are set for a strong release though, analysts believe that the consumer demand will bounce back up after last month’s discouraging report and the recent pickup in employment and wages’ growth support the case of a bullish Retail Sales report.
Should that be the case then the US Dollar while have the opportunity to rally again versus the likes of the Euro and the Pound. The two European majors have enjoyed gains against the US currency latterly with the Pound especially having run a 300 pips uptrend over the past few days. Yesterday it was the surprising printing of the Industrial Production report that allowed the Pound to reach the 1.5500 area even though the rest of the reports were mixed.
We believe that it was not the actual printing of the report that helped the Pound move to the upside but the general sentiment over the UK currency that was lifted by BoE policymakers’ comments. Further talk about the domestic economy from the BoE is expected tomorrow so we could see an extension to these gains.
Unlike the Cable, the Euro did gain against the Dollar yesterday but no fresh highs were hit. The Euro remains capped below the 1.1400 barrier at this time and even though we’ve seen some volatility in recent days we continue to believe that the recent rally has fizzled out.
Whether the Euro will be able to overcome the 1.1400 resistance wall or whether it will dip below the 1.1250 area and move towards the 1.1050 lows hinges on the Retail Sales report. On the short term volatility could be elevated so be prepared to be fast on your trades.
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