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Mid-Day Report: Sterling Tumbles on Retail Sales Miss, Yen Jumps Print E-mail
Market Overview | Written by | Feb 17 17 12:58 GMT

Mid-Day Report: Sterling Tumbles on Retail Sales Miss, Yen Jumps

Sterling comes under much selling pressure today after disappointing data. Retail sales unexpectedly dropped -0.3% mom in January versus expectation of 1.0% rise. The pound is set to end the week as the weakest major currency after a string of weak data. That includes the CPI miss released on Tuesday and wage growth miss released on Wednesday. These data dampened speculations of a BoE rate hike by year end. In addition to that, the impact of Sterling's depreciation since last year's Brexit referendum appears to be fading. And there are a lot of uncertainties ahead as prime minister Theresa May would trigger Article 50 for Brexit by the end of next month.

The Japanese Yen, on the other hand, rebounds stronger today and reversed all the week's losses. The sharp reversal in US treasury yield is seen as a factor driving Yen higher. Meanwhile, markets could be getting a bit cautious as the meeting of G20 foreign ministers carry on in Germany. There are concerns that US Secretary of State Rex Tillerson could repeat Donald Trump administration's attack on other countries regarding currency manipulation. And such comments could trigger strong reactions that would in turn stir up the markets.

While Dollar is attempting for a rebound today, it's trading mixed for the week. A string of strong economic data plus chorus of hawkish fedspeaks provided no support to the greenback. Traders are clearly dissatisfied with the lack of details on US president Donald Trump's economic policies. And the markets are still keen waiting on Trump's announcement of some "phenomenal" tax reforms. For all the uncertainties, traders are holding their bets on Fed's rate path.

Elsewhere, Eurozone current account surplus narrowed to EUR 31.0b in December. New Zealand business NZ manufacturing index dropped to 51.6 in January. Retail sales rose 0.8% yoy in Q4.

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 112.77; (P) 113.53; (R1) 114.00; More...

Intraday bias in USD/JPY remains mildly on the downside for 111.58 low. Corrective fall from 118.65 is possibly still in progress and break of 111.58 will target 38.2% retracement of 98.97 to 118.65 at 111.13. We'd expect strong support from there to contain downside and bring rebound. On the upside, break of 114.94 resistance should now confirm completion of the correction. And in that case, USD/JPY should target a retest on 118.65 high.

In the bigger picture, price actions from 125.85 high are seen as a corrective pattern. The impulsive structure of the rise from 98.97 suggests that the correction is completed and larger up trend is resuming. Decisive break of 125.85 will confirm and target 61.8% projection of 75.56 to 125.85 from 98.97 at 130.04 and then 135.20 long term resistance. Rejection from 125.85 and below will extend the consolidation with another falling leg before up trend resumption.

Economic Indicators Update

GMT Ccy Events Actual Consensus Previous Revised
21:30 NZD Business NZ Manufacturing Index Jan 51.6 54.5 54.2
21:45 NZD Retail Sales Ex Inflation Q/Q Q/Q 0.80% 1.00% 0.90% 0.80%
9:00 EUR Eurozone Current Account (EUR) Dec 31.0B 36.1B 36.4B
9:30 GBP Retail Sales M/M Jan -0.30% 1.00% -1.90% -2.10%
13:30 CAD International Securities Transactions (CAD) Dec 7.24B
15:00 USD Leading Indicators Jan 0.50%

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