The dollar rose to one-month highs against a basket of its major peers on Friday, after stronger-than-expected reports on U.S. retail sales and consumer sentiment soothed investor concerns over the strength of the economy.
The U.S. Commerce Department said retail sales increased by 1.3% last month, compared to expectations for a rise of 0.8%. Core retail sales, which exclude automobile sales, increased by 0.8% in April, beating forecasts for an advance of 0.5%. A separate report showed that U.S. producer price inflation rose by 0.2% in April, compared to expectations for a 0.3% gain. Year-on-year, producer prices were flat. Core PPI, which excludes food and energy, ticked up 0.1% last month, in line with expectations.
Elsewhere Bank of Japan Governor Haruhiko Kuroda said on Friday that the central bank will act "decisively" to achieve its 2% inflation target, stressing that it still has "ample" policy options available if it were to expand stimulus again.
In the week ahead, investors will be looking ahead to Tuesday’s data on U.S. inflation and Wednesday’s minutes of the Fed’s April meeting, for clues on the path of future interest rate increases. Preliminary data from Japan on first quarter growth and jobs reports from the U.K. and Australia will also be in focus.
Today Frankfurt Stock Exchange will remain closed for the Whit-Monday holiday; the U.S. is to release data on manufacturing activity in the New York region.
The euro fell sharply on Friday, as the dollar continued its rally from 9-month lows amid an unexpected surge in U.S. consumer sentiment and after official data showed that the single currency bloc’s gross domestic product rose to 0.5% in the first quarter, from 0.3% in the preceding quarter.
That was below the initial reading of 0.6% released on April 29 and consensus that was expecting no change. Year-on-year, GDP in the single currency bloc rose 1.5%, also below the initial estimate, the fourth quarter reading and analyst forecasts for growth of 1.6%.
This week investors’ focus will be on Tuesday’s data on U.S. inflation and Wednesday’s minutes of the Fed’s April meeting, for clues on the path of future interest rate increases.
Pivot: 1.1365Support: 1.128 1.1245 1.1215Resistance: 1.1365 1.139 1.1415Scenario 1: short positions below 1.1365 with targets @ 1.1280 & 1.1245 in extension.Scenario 2: above 1.1365 look for further upside with 1.1390 & 1.1415 as targets.Comment: as long as the resistance at 1.1365 is not surpassed, the risk of the break below 1.1280 remains high.
Gold
Gold prices inched up modestly on Friday, but gains were limited as traders reassessed their expectations for the timing of the next U.S. rate hike following the release of better than expected U.S. retail sales and consumer sentiment data.
Meanwhile, the preliminary reading for consumer sentiment in May jumped to an 11-month high of 95.8, well above the expected reading of 90.0, driven by steadily rising incomes, better employment prospects and low inflation. The upbeat data suggested the economy was regaining momentum after growth almost stalled in the first quarter, bolstering the view that the Federal Reserve is still on track to raise rates before the end of the year.
This week gold traders will focus on Wednesday’s minutes of the Federal Reserve’s March policy meeting for fresh clues on the timing of the next U.S. rate hike.
Pivot: 1276Support: 1276 1265 1261Resistance: 1288 1295 1305Scenario 1: long positions above 1276.00 with targets @ 1288.00 & 1295.00 in extension.Scenario 2: below 1276.00 look for further downside with 1265.00 & 1261.00 as targets.Comment: the RSI calls for a rebound.
WTI Oil
Crude oil futures fell for the first time in three sessions on Friday, pulling back from six-month highs, as renewed concerns over a global supply glut prompted traders to book recent gains and a stronger U.S. dollar weighed.
U.S. crude futures for June delivery were down 1.13% at $46.17 a barrel, off the previous session’s six-month high of 47.02.
OPEC said the global oil market remains oversupplied and pointed to a larger supply surplus on the market this year, after sanctions on Iran were lifted and an initiative with Russia and other non-members to tackle a supply glut by freezing output failed last month. OPEC pumped 32.44 million barrels per day in April, the group said in a monthly report citing secondary sources, up 188,000 bpd from March, this is the highest since at least 2008.
This week energy traders will focus on U.S. stockpile data on Tuesday and Wednesday for fresh supply-and-demand signals.
Pivot: 45.8Support: 45.8 44.92 44.05Resistance: 47.7 48.15 48.8Scenario 1: long positions above 45.80 with targets @ 47.70 & 48.15 in extension.Scenario 2: below 45.80 look for further downside with 44.92 & 44.05 as targets.Comment: the RSI is mixed with a bullish bias.
US 500
U.S. stocks fell on Friday as a decline in oil prices added to pressure from consumer companies after gloomy quarterly reports from Nordstrom (NYSE:JWN) and J.C. Penney overshadowed upbeat April retail sales data.
The decline in the department stores' shares marked the end of a week that highlighted the expanding clout of Amazon.com (NASDAQ:AMZN) and the plight of brick-and mortar retailers struggling to keep up with the online seller.
The Dow Jones industrial average dropped 1.05%, the S&P 500 lost 0.85% and the Nasdaq Composite dropped 0.41%, because all of its 10 major sectors fell, led by a 1.29% decline in financials. For the week, the Dow fell 1.2%, the S&P dipped 0.5% and the Nasdaq lost 0.4%. It was the third week in a row of losses for the Dow and S&P 500.
This week investors will focus on Wednesday’s minutes of the Federal Reserve’s March policy meeting, for fresh clues on the timing of the next U.S. rate hike.
Pivot: 2035 Support: 2035 2006 1970 Resistance: 2085 2100 2130 Scenario 1: long positions above 2035.00 with targets @ 2085.00 & 2100.00 in extension. Scenario 2: below 2035.00 look for further downside with 2006.00 & 1970.00 as targets. Comment: the RSI is mixed and calls for caution. A head-and-shoulders pattern is taking shape.