Taken Positions
GBP/USD: short at 1.4730, target 1.4500, stop-loss 1.4845, risk factor *
EUR/JPY: short at 127.20, target 125.00, stop-loss moved to 127.20, risk factor ***
EUR/CAD: short at 1.3370, target 1.3200, stop-loss moved to 1.3300, risk factor **
GBP/JPY: short at 176.40, target 173.70, stop-loss moved to 176.40, risk factor ***
CHF/JPY: short at 123.20, target 120.50, stop-loss moved to 123.20, risk factor ***
Pending Orders
EUR/USD: sell at 1.0750, if filled – target 1.0460, stop-loss 1.0905, risk factor ***
USD/JPY: buy at 118.60, if filled – target 121.10, stop-loss 117.40, risk factor ***
USD/CHF: buy at 0.9640, if filled – target 0.9790, stop-loss 0.9570, risk factor ***
EUR/USD: Bears Becoming More Frustrated With Weak U.S. Figures
(sell at 1.0750)
- U.S. retail sales jumped 0.9% mom last month, after 0.5% mom decline in February. The reading was only slightly lower than the market expectations for 1.0% mom rise. That was the largest gain since the same month last year and snapped three straight months of declines that had been blamed on harsh winter weather.
- Excluding the volatile categories of autos, gas, building materials and restaurants, sales rose 0.3% mom after dropping 0.2% mom in February. The so-called core retail sales correspond most closely with the consumer spending component of GDP. Last month's mild rebound in core retail sales and February's decline pointed to a slower pace of consumer spending in the first quarter. We should notice, however, household savings are at their highest level in just over two years, thanks to a tightening labor market and cheaper gasoline. This suggests a strong potential for consumers to boost spending in the months ahead.
- In a separate report, the Labor Department said its PPI for final demand rose 0.2% mom and fell 0.8% yoy last month, the biggest yoy decline since the revamped series started in 2009. Low inflation and signs of a sharp slowdown in economic growth in the first quarter have prompted investors to push back their expectations for the first Fed rate hike to either September or October from June.
- The EUR/USD jumped after the release of the retail sales data to daily high of 1.0708, just above the stop-loss level of our short position. The relatively outsized market reaction to the U.S. retail sales data suggested USD bulls were becoming frustrated with the recent string of U.S. economic data and trimming their long-USD bets. However, the recovery was short-lived and the rate went back below 1.0600 today in the morning of the European session. The short-term outlook is still bearish. We are looking to get short again and have placed our sell order at 1.0750 (10-dma).
- The ECB meeting is scheduled for today. We should expect little news from ECB President Draghi’s press conference. We wrote in yesterday’s Market Overview that some investors were already asking when and how the ECB might start scaling down its stimulus. In our opinion Draghi will not give any hint on this issue today. ECB President is expected to say the central bank intends to fully deliver previously announced stimulus measures as risks to growth remain and inflation is subdued.
Significant technical analysis' levels:
Resistance: 1.0708 (high Apr 14), 1.0750 (10-dma), 1.0788 (high Apr 9)
Support: 1.0532 (low Apr 14), 1.0521 (low Apr 13), 1.0457 (low Mar 16)
AUD/USD Hit By China Data
(stay sideways)
- A measure of Australian consumer sentiment fell 3.2% mom and 3.5% yoy in April. The retreat unwound more of February's sharp 8.0% gain which followed a cut in interest rates early that month.
- A measure of family finances compared to a year ago fell 7.4%, while the outlook for the next 12 months eased a relatively slim 0.7%. Despite all the anxiety, respondents still felt it was a good time to buy a major household item, with that index climbing 5.9% in April.
- The AUD/USD opened Wednesday at 0.7626, but quickly fell below 0.7600 and is depreciating further. Part of the weakness came after the release of weaker measure of Australian consumer sentiment but China data were also not helping. Annual economic growth in China slowed, as expected, to a six-year low of 7% in the first quarter, while retail sales and industrial output undershot forecasts. Chinese retail sales rose 10.2% yoy vs. median forecast for a 10.9% yoy rise. Industrial output went up by 5.6% yoy vs. median forecast for a 6.9% yoy rise.
- Investors slightly increased the risk of an interest rate cut by the Reserve Bank of Australia in May. However, in our opinion May rate cut is uncertain. That is why we see a risk of the relatively stronger AUD and stay sideways on the AUD/USD.
Significant technical analysis' levels:
Resistance: 0.7678 (session high Apr 13), 0.7694 (21-dma), 0.7720 (high Apr 10)
Support: 0.7556 (low Apr 14), 0.7534 (low Apr 2), 0.7500 (psychological level)