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US retail sales rose 1.0% mom to USD 680.6B in June, above expectation of 0.8% mom. Ex-auto sales rose 1.0% mom, above expectation of 0.6% mom. Ex-gasoline sales rose 0.7% mom. Ex-auto, ex-gasoline sales rose 0.7% mom. Retail trade rose 1.0% mom. Gasoline sales rose 3.6% mom. Total sales for the three months through June were up 8.1% yoy.

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The dollar index is trading just under new highest since Sep 2002, hit on Thursday’s acceleration above 109.00 mark.

The greenback remains well supported by strong risk aversion on global economic and political uncertainty, while the latest talks that the Fed may opt for a super-sized 1% rate hike in its July 26-27 policy meeting, following the latest US inflation report which showed that consumer prices continue to rise.

In addition, data showed that Chinese economy sharply slowed in the second quarter, while political crisis in Italy is deepening and US banking earning season started on a weak tone that adds to negative outlook and further boosts safe-haven flows that supports the US currency.

On the other side, calmer tones come from some Fed policymakers, who favor another 0.75% hike this month that could cool down euphoric sentiment on expectations for more aggressive steps from the US central bank.

The dollar index is on track for the third consecutive week of gains that is positive signal, but daily studies started to point lower and warn of correction.

Daily stochastic emerged from overbought territory and stretched 14-d momentum is starting to turn south.

The price adjustment is likely to be limited and offer better levels to re-enter strong uptrend, but traders may become more aggressive sellers if the Fed disappoints high expectations.
Dips should stay above rising 10DMA (107.21) and a trendline support (106.98) to keep larger bulls intact.

Res: 108.56; 109.12; 109.67; 110.00
Sup: 108.08; 107.21; 106.98; 106.51

The euro continues to trade close to the parity line, after breaking below this symbolic level during the week. It marked the first time that EUR/USD fell below parity since 2002. On Thursday, EUR/USD dropped to a low of 0.9952, as the US dollar showed some broad strength. However, the euro has managed to claw its way back above the parity line.

There are no tier-1 events in the eurozone today, which means the market’s attention will be directed to the US, with the release of retail sales and UoM consumer sentiment.

Will US retail sales rebound?

Retail sales is expected to bounce back after a disappointing reading of -0.3% in June. The consensus for June stands at 0.8%, but some economists are forecasting another decline due to surging inflation, which the Fed hasn’t succeeded in lowering. Another decline would reinforce fears of a recession, which could reduce the likelihood of the Fed delivering a massive 1.00% hike. According to the CME’s Fed Watch, the likelihood of a 1.00% hike has jumped to 50/50, with inflation rising to 9.1%, meaning it’s a tossup between a hike of 0.75% or 1.00%. If retail sales is stronger than expected, the Fed will have a clearer path to a 1.00% move, which would be good news for the US dollar.

US consumer confidence has eroded badly in recent months as inflation continues to accelerate and the cost of living crisis gets worse. The UoM consumer sentiment index is expected to drop to 49.9 in July. This would be a small move from the 50.0 reading in June but would be nonetheless significant, as the index hasn’t contracted for over a decade. Weak consumer confidence can quickly translate into decreased consumer spending, a key driver of economic growth. With growing fears that the US economy is close to a recession, the last thing needed is for consumers to cut back on spending.

EUR/USD Technical

• EUR/USD is testing support at 1.0018. Below, there is support at 0.9889
•  There is resistance at 1.0124 and 1.0242

NZ Manufacturing PMI contracts

The New Zealand dollar has edged higher on Friday. The currency yawned as New Zealand’s Manufacturing PMI fell into contraction territory in June, for the first time since August 2021, during the last national lockdown in the country. The PMI slipped to 49.7, down from 52.6 in May. A reading above 50.0 points to expansion. Manufacturers highlighted the usual suspects affecting the sector – worker shortages and supply chain disruptions. The contraction adds to concerns about the economic outlook, as the RBZN moves ahead with an aggressive rate-tightening cycle.

As expected, the Reserve Bank of New Zealand raised rates by 0.50% earlier in the week, bringing the cash rate to 2.50%. The New Zealand dollar responded with a mere shrug, indicative of the move being priced in by the markets. It wasn’t all that long ago that a 50bp increase was considered a massive move and grabbed the headlines, but now such moves from central banks barely raise an eyebrow, as was the case with the RBNZ decision. With central banks raising rates fast and furiously in order to curb runaway inflation, large rate hikes have become the norm.

The week wraps up with US retail sales later today. This release is always important and will be closely watched as the Fed must decide whether to raise rates by 0.75% or 1.00%  at the meeting in late July. There was some relief in the financial markets on Thursday after FOMC members Waller and Buller said that they were leaning towards a 0.75% rate hike, but at the same time both members qualified their remarks as being dependent on “incoming data”.

Today’s retail sales certainly fits that bill and if retail sales outperforms, the likelihood of a 1.00% hike will recede, which would be bearish for the US dollar. Conversely, a weak reading will raise the likelihood of a 1.00% move, making the US dollar more attractive to investors.

NZD/USD Technical

• NZD/USD is testing resistance at 0.6125. Above, there is resistance at 0.6189
• There is support at 0.6062 and 0.5998

The Euro started a fresh decline below the 1.0100 support zone against the US Dollar. The EUR/USD pair even traded below the 1.0050 level to move into a bearish zone.

Moreover, there was a spike below the key parity level. A low is formed near 0.9953 and the pair is now correcting losses. It recently cleared a connecting bearish trend line with resistance near 1.0030 on the hourly chart.

On the upside, the first major resistance is near the 1.0050 level. A break above the 1.0050 and 1.0070 resistance levels could start a decent recovery wave. In the stated case, it could even surpass 1.0100 on FXOpen.

An immediate support is near the 1.0000 level. The next key support is near 0.9980, below the pair could decline towards the 0.9950 level in the near term. Any more losses might send the pair towards the 0.9920 level.

Eurozone exports of goods to the rest of the world rose 28.9% yoy to EUR 248.5B in May. Imports of goods rose 52.0% yoy to EUR 274.8B. Trade deficit came in at EUR -26.3B. Intra-eurozone trade rose 33.0% yoy to EUR 231.6B.

In seasonally adjusted term, exports rose 4.8% mom to EUR 241.8B. Imports rose 2.0% mom to EUR 267.8B. Trade deficit narrowed from April's EUR -31.8B to EUR -26.0B, slightly smaller than expectation of EUR -26.3B. Intra-eurozone trade rose from EUR 217.2B to EUR 221.4B.

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Daily Pivots: (S1) 163.22; (P) 164.20; (R1) 165.32; More...

Intraday bias in GBP/JPY remains neutral for the moment. On the upside, firm break of 165.26 minor resistance will argue that corrective pattern from 168.67 has completed. Further rise should be seen to retest 168.67 high next. On the downside, break of 160.37 will bring deeper fall back towards 155.57 support.

In the bigger picture, up trend from 123.94 (2020 low) is still in progress. Sustained break of 61.8% retracement of 195.86 (2015 high) to 122.75 (2016 low) at 167.93 will be a long term bullish signal, and could pave the way back to 195.86 high. This will now remain the favored case as long as 155.57 support holds, even in case of deep pull back.

Daily Pivots: (S1) 138.24; (P) 139.00; (R1) 140.01; More....

Intraday bias in EUR/JPY remains neutral for the moment. On the upside, firm break of 139.78 minor resistance will argue that pull back from 144.26 has completed at 136.85. Further rally would be seen back to retest 144.26 high. On the downside, though, below 136.85 will resume the fall back to 132.63 support.

In the bigger picture, up trend from 114.42 (2020 low) is seen as the third leg of the pattern from 109.30 (2016 low). Further rally is in favor as long as 134.11 resistance turned support holds, even in case of deep pull back. Firm break of 139.78 will target 149.76 (2015 high. However, sustained break of 134.11 will be a sign of medium term bearish reversal and turn focus to 124.37 support for confirmation.

Daily Pivots: (S1) 0.8443; (P) 0.8471; (R1) 0.8500; More...

Intraday bias in EUR/GBP stays neutral at this point. Further decline is expected as long as 0.8552 minor resistance holds. Rebound from 0.8201 should have completed at 0.8720, after rejection by 0.8697 medium term fibonacci level. Below 0.8401 ill target a test on 0.8201/48 support zone next.

In the bigger picture, rejection by 38.2% retracement of 0.9499 to 0.8201 at 0.8697 argues that rebound from 0.8201 is merely a corrective move. That is, down trend from 0.9499 (2020 high) is now over. Sustained break of 0.8201 will resume such decline and target 61.8% retracement of 0.6935 to 0.9499 at 0.7917. This will now remain the favored case as long as 0.8720 resistance holds.

Daily Pivots: (S1) 1.4760; (P) 1.4852; (R1) 1.4939; More...

Intraday bias in EUR/AUD remains neutral for the moment. Further decline is in favor with 1.5043 minor resistance intact. Decisive break of 1.4759 support should confirm that corrective rise from 1.4318 has completed at 1.5396 after rejection by 1.5354 support turned resistance. Deeper fall should then be seen back to retest 1.4318 low. On the upside, however, break of 1.5043 will bring stronger rebound back towards 1.5396.

In the bigger picture, rejection by 1.5354 support turned resistance, as well as 55 week EMA (now at 1.5398), maintain medium term bearishness. That is, larger down trend from 1.9799 is not completed yet. Break of 1.4318 low will target 61.8% projection of 1.9799 to 1.5250 from 1.6434 at 1.3623, which is close to 1.3624 long term support (2017 low). This will remain the favored case now as long as 1.5396 resistance holds.