Sat, Mar 25, 2023 @ 05:06 GMT
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US update: Limited loss in Dollar and stocks after terrible retail sales

While Dollar and stocks suffered some selling after shockingly poor retail sales data, there was no follow through selling. US retail sales contracted by most in 9 years in December. But some economists are quick to come out to express their skepticism on the data (see here).

Bloomberg also reported that US and China are still far apart on the core issues in trade negotiations. In particular, dialing back subsidies for state-owned enterprises is a non-starter for the Chinese government. But this is actually much of a known in Asia.

That is, for the Chinese government, buy more American products? Sure. Open up some market access? No problem except some sensitive ones, like internet and media. IP theft and forced technology transfer? Maybe, and they can do something to govern private owned companies. But SOEs? Well, it’s a fundamental government policy that cannot be touched. It’s an area that eventually, the US has to concede. So, this news shouldn’t trigger much pessimism among professional investors.

Anyways, Dollar is currently the third weakest one for the day, next to Sterling and Canadian Dollar. Kiwi remains the strongest one. But Yen has already taken the second strongest place, followed by Swiss Franc indicating risk aversion.

But as seen in the 4H heatmap, Dollar is the strongest one, followed by Swiss Franc and Yen. The greenback might be staging a rebound.

Technically, EUR/USD’s recovery is held well below 1.1341 minor resistance. USD/CHF’s retreated is held above 1.1004 minor support, not to mention 0.9988 structural support. GBP/USD is in near term decline for 1.2391 low. AUD/USD is in consolidation above 0.7054 temporary low. USD/CAD breached 1.3329 resistance to resume the rebound from 1.3068. So all in all, today’s negative news doesn’t trigger much bearishness in Dollar.

As for stocks, DOW hit as low as 25308.09 earlier today but it’s back above 25370, just down -0.66. That isn’t too serious. Our own view, as mentioned multiple times before, is that we expect further loss of momentum as DOW approaches 78.6% retracement of 26951.81 to 21712.53 at 25830.60. And the rebound from 21712.53 should complete around that level. However, break of 24883.03 support is needed to be the first sign of near term reversal. Otherwise, we cannot declare we’re correct yet.

For now,

  • DOW is down -0.66%.
  • S&P 500 is down -0.44%
  • NASDAQ is down -0.13% only.
  • 10-year yield is down -0.045 at 2.663, back below 2.7.
  • 30-year yield is down -0.024 at 3.010, still above 3.0.

In Europe:

  • FTSE closed up 0.28%, thanks to decline in Sterling.
  • DAX closed down -0.51%.
  • CAC closed up 0.04% only, erased nearly all early gains.
  • German 10-year yield is down -0.022 at 0.105. It breached 0.1 handle earlier.

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