US retail sales missed expectations for September, further raising doubts that the Fed will have the fundamentals behind them to raise interest rates this calendar year. If you’re clinging onto the thin possibility that the jackpot USD long trade is still in play, this is just yet another reason to reconsider your stance.
“USD Core Retail Sales m/m (-0.3% v -0.1% expected)”
“USD Retail Sales m/m (0.1% v 0.2% expected)”
The August revision was also to the downside, from an initial 0.2% to an even 0.0%.
If you are still looking for a positive spin on the numbers, discretionary spending was it. In other words, people are still buying cars and going out to dinner. This points to the possibility that domestic demand is still strong enough to provide some sort of cushion to the storm of bad news that everyone else is looking at.
A storm that includes slowing global growth and lower commodity prices putting a lid on spending across the majorly contributing US energy sector. We’ll need to see a significant shift in the trend of recent data releases to change the Fed’s course.
Markets have now priced the expectation of a Fed rate hike in the coming months at the following levels:
October: 6%
December: 30.4%
January: 38.8%
Mar: 52.3%
USD/JPY 4 Hourly:
Click on chart to see a larger view.
The Dollar move was shown nicely on the USD/JPY short trade we’ve been watching. With the BoJ leaving rates unchanged and QE expectations staying on course, both the USD and JPY fundamentals are lining up to make sure that the trend line resistance level in play continues to hold.
Find the path of least resistance and follow it.
On the Calendar Thursday:
AUD Employment Change
AUD Unemployment Rate
USD CPI m/m
USD Core CPI m/m
USD Unemployment Claims
USD Philly Fed Manufacturing Index
Chart of the Day:
Elsewhere, the UK unemployment rate hit its lowest level for more than 5 years last night, beating expectation and giving the Pound a kick.
“GBP Unemployment Rate (5.4% v 5.5% expected)”
The 5.4% print was the lowest jobless rate seen since as far back as 2008. Being a pre-GFC reading, the fact that unemployment is now again below that level is hugely significant in terms of recovery in the eyes of the Bank of England who are still looking at their next interest rate move being up.
GBP/USD Daily:
First of all taking a look at the Cable daily chart, we can see that price has consolidated into a sideways range after breaking out of its bearish trend back in May. I really like this chart because of how clearly defined the range is, as well as the levels that price is using to step between.
GBP/USD 4 Hourly:
Now zooming into the 4 hourly chart, we most obviously find price sitting at short term trend line resistance, but also coming into a previously tested horizontal support/resistance zone. Just remember the path of least resistance.
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