Sat, Oct 23, 2021 @ 01:41 GMT
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USD Gains On Stronger Retail Sales

The greenback remained at rather high levels yesterday, gaining against a number of its counterparts after stronger than expected financial data released yesterday tended to reshuffle the market’s expectations for the Fed’s intentions. The US retail sales growth rate for August accelerated more than expected escaping the negative territory and showing growth once again while the business sentiment in the wider Philly area seems to improve. On the other hand, the weekly initial jobless claims figure rose underscoring a possible slack in the US employment market. US stockmarkets tended to close rather mixed, as investors contemplated the possible effects of the financial data released, while gold’s price retreated clearly due to the strengthening of the USD as US yields showed little movement. We expect trader’s attention to turn towards the release of the preliminary University of Michigan Consumer Sentiment for September, while market worries for the possible intentions of the Fed could also provide direction for the markets.

The USD index chart was in dire need of a recalibration, as the price action indicated the importance of the 92.85 (R1) resistance line, which also halted at least temporarily USD index’s upward price action yesterday. To switch our bias for a sideways motion in favor of a bullish outlook we would require though a clear breaking of the 92.85 (R1) resistance line. It should be noted that the RSI indicator below our 4-hour chart is between the readings of 50 and 70, implying a light advantage for the bulls for the time being. Should the bulls actually take over, we would expect the index to break the 92.85 (R1) resistance line and aim for the 93.20 (R2) resistance level, which capped the index’s upward motion on the 10th and the 27th of August. Should the bears say enough is enough, we may see the index reversing course, breaking the 92.40 (S1) support line, which forms the lower boundary of the index sideways motion and aim for the 92.08 (S2) level, which held its ground against the index’s downward motion early September.

The pound retreats against the USD, yet not the EUR

The pound retreated against the USD, yet not the EUR as GBP traders now turn their attention on the release of the UK retail sales growth rate for August, while considerable market attention is also placed on BoE’s interest rate decision next week. The pound had gained somewhat the momentum in the current week as the markets are expecting BoE to show a firmer stance regarding its monetary policy given that CPI rates accelerated substantially last month while the employment market tended to tighten for the month of July. On the fundamental side the UK seems about to face an energy crisis, which could weigh on the recovery of the UK economy and its characteristic that a major fertilizer producer shut down two plants not clearing when production is expected to restart. We expect pound traders today to focus on the release of the UK retail sales growth rate for August, yet fundamentals may also sway pound traders opinion.

GBP/USD dropped yesterday placing some distance between its price action and the 1.3845 (R1) resistance line, yet the bearish trendline does not seem to be forming just yet. We tend to maintain a bias for a sideways motion for the time being, despite the RSI indicator below our 4-hour chart, which is just below the reading of 50, reminding us of the presence of the bears. Should the selling interest be extended, we may see the pair breaking the 1.3670 (S1) line and aim for lower grounds. Should the bulls take over we may see the pair breaking the 1.3845 (R1) and continue higher to test the 1.3990 (R2) level.

Other economic highlights today and the following Asian session:

Today we note the release of UK’s retail sales for August and Eurozone’s HICP rate for August. In the American session we note the release of the preliminary University of Michigan consumer sentiment for September.

USD Index H4 Chart

Support: 92.40 (S1), 92.08 (S2), 91.70 (S3)

Resistance: 92.85 (R1), 93.20 (R2), 93.70 (R3)

GBP/USD H4 Chart

Support: 1.3670 (S1), 1.3625 (S2), 1.3430 (S3)

Resistance: 1.3845 (R1), 1.3990 (R2), 1.4145 (R3)


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