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Eyes On US Retail Sales And CPI Releases
Friday May 12th will see the release of a set of crucial US data for April at 13:30 BST; retail sales, retail sales excluding autos, CPI and core CPI. Please be aware that it will likely affect USD and USD crosses along with commodities.
The dollar index has rebounded over the past four trading sessions after hitting a low 6-month low of 98.40. Gold prices saw a rebound on Thursday, and has now touched a three-day high of $1228.98 on Friday during early European session.
US retail sales (MoM) saw a downtrend over the past three months mainly caused by the decline in auto and petroleum sales. The consensus for the April figure is an optimistic forecast of 0.6%. However, sales in April for the two automobile tycoons, Ford and GM, saw a further falling of 7.1% and 5.8% respectively. The declines will likely weigh on the upcoming data. US retail sales outlook seems to be a bit gloomy before auto sales see a recovery.
Retail sales excluding autos (MoM) also saw a downtrend over the past three months with the reading for March falling into zero growth, not seen since August 2016.
US CPI (YoY) has seen a healthy upswing since August 2015; staying above the Fed’s 2% target since December 2016. Core CPI (YoY) has been oscillating steadily in the range between 2.1% – 2.3% since January 2016.
On Thursday, the Bank of England (BoE) announced that; interest rates remain unchanged at 0.25% and the asset purchase programme also remains unchanged at £435 billion which are both in line with market expectations. The BoE sees inflation to be above their 2% target for the next three years due to weak GBP. Consumption will continue to experience a slowdown; however, this will be balanced by rising trade and investment. Wage growth is expected to be quicker in 2018.
The BoE forecasts interest rates are likely to remain at the current level until late 2019. However, monetary policy may need to be tightened more than the markets expect over the next three years. The BoE also predicts the Brexit process to be smooth.
The BoE holds a positive outlook on inflation and economy, however, it seems to be overly optimistic about the Brexit negotiation process. The EU is unlikely to make the process easy for the UK, to avoid encouraging other member states leaving following Brexit.
GBP/USD fell from 1.2940 after the UK data was released, holding above the significant support line at 1.2900. This support level was breached following the BoE announcement with GBP/USD hitting a 1-week low of 1.2848.
Technical Outlook: USDJPY – Risk Of Deeper Pullback Remains In Play
The USDJPY pair remains in red in early Friday's trading and pressures Thursday's low at 113.44, where Fibo 38.2% of 112.07/114.36 upleg offered temporary support.
Pullback from double-rejection at 114.36, triggered by profit-taking, may extend on weakening near-term studies as thick hourly cloud capped recovery attempts and maintains pressure.
Loss of 113.46 handle would expose next strong supports at 113.05 (rising daily Tenkan-sen and 10/100 SMA bull-cross) and 112.79 (daily cloud top), loss of which would signal stronger correction The notion is supported by reversal of daily RSI/slow stochastic from overbought territory.
Res: 113.93, 114.10, 114.36, 114.87
Sup: 113.44, 113.05, 112.79, 112.38
USD/CAD Candlesticks and Ichimoku Analysis
Weekly
• Last Candlesticks pattern: Bullish engulfing
• Time of formation: 02 May 2016
• Trend bias: Up
Daily
• Last Candlesticks pattern: Hammer
• Time of formation: 19 Oct 2016
• Trend bias: Up
USD/CAD – 1.3694
As the greenback has eased after rising to 1.3794 late last week, suggesting consolidation below this level would be seen, however, reckon downside would be limited to support at 1.3643 and bring another rise later, above said resistance at 1.3794 would extend recent upmove from 1.2461 low for further gain to 1.3835-40 (61.8% Fibonacci retracement of 1.4690-1.2461) and possibly towards 1.3900-10, however, near term overbought condition should prevent sharp move beyond 1.3950 and price should falter below psychological resistance at 1.4000, risk from there is seen for a retreat later.
On the downside, expect pullback to be limited to support at 1.3643 and bring another rise later to aforesaid upside targets. Below 1.3600-10 would defer and risk correction to 1.3550-60 but break of support at 1.3530 is needed to signal a temporary top is formed, bring test of the Kijun-Sen (now at 1.3509), a daily close below there would suggest recent rise has ended instead, risk deeper correction to 1.3490-00, then 1.3450-55 but price should stay well above support at 1.3411, bring a strong rebound later.
Recommendation: Hold long entered at 1.3650 for 1.3850 with stop below 1.3550.
On the weekly chart, as the greenback has maintained a firm undertone after breaking above previous resistance at 1.3599, adding credence to our bullish view that the erratic upmove from 1.2461 (2016 low) is still in progress and bullishness remains for this move to extend headway to 1.3835-40 (61.8% Fibonacci retracement of 1.4690-1.2461) and then 1.3900 but overbought condition should prevent sharp move beyond psychological resistance at 1.4000, risk from there has increased for a retreat to take place.
On the downside, although initial pullback to 1.3645-50 cannot be ruled out, reckon downside would be limited to previous resistance at 1.3599 (now support) and bring another rise later. Only below the upper Kumo (now at 1.3576) would defer and risk test of the Tenkan-Sen (now at 1.3509), break there would defer and suggest top is possibly formed, risk weakness to 1.3450, then test of support at 1.3411 but reckon the Kijun-Sen (now at 1.3382) would limit downside and bring another rise later. In the event the pair drops below the Kijun-Sen, this would suggest top is formed instead, bring weakness to 1.3300, then 1.3260-65 but reckon support at 1.3223 would remain intact.
Gold Analysis: Approaches 1,230 Mark
'Whatever Trump says is important and is affecting the markets and may influence gold prices for the short-term.' – Barnabas Gan, OCBC (based on Reuters)
Pair's Outlook
On Friday morning the yellow metal's price moved higher, as it was attempting to break the resistance, which is put up by the 100-day SMA. The SMA on Friday morning was located at the 1,228.32 level. As the SMA has kept the rate lower for the past three trading session, a break of it would release the piled up bullish momentum, which can be observed also in the SWFX market sentiment. The resulting surge could result in the commodity price reaching the weekly PP at 1,242.06, which is the closest resistance level above the mentioned simple moving average.
Traders' Sentiment
SWFX traders are almost neutral, as 51% of open positions are long. Meanwhile, 62% of trader set up orders are to buy the metal.
EUR/USD Analysis: Finds Support Against Buck
'Until there is a stronger move down, the chart is now neutral.' – Al Brooks, Brooks Price Action (based on investing.com)
Pair's Outlook
After touching the 1.0840 mark on Thursday the EUR/USD currency exchange rate began a surge, which lasted into the morning hours of Friday's trading. On the daily chart it can be observed that the support for the rebound was provided by the 20-day SMA, which on Friday was already located at the 1.0855 level. Due to that it is highly possible that the currency exchange rate will once more move into the resistance put up by the weekly S1, which is located at the 1.0916 level.
Traders' Sentiment
SWFX traders have slightly decreased their bearish positions, as 59% of open positions are short on Friday, compared to 60% previously. Meanwhile, trader set up sell order proportion has decreased from 65% to 57%.
GBP/USD Analysis: Continues To Consolidate
'Altogether we remain constructive on GBP and remain long via a basket of USD, EUR and AUD. We remove EUR/GBP upside from our 2017 forecasts and expect GBP/USD to test 1.37 by year-end.' – Nomura (based on FXStreet)
Pair's Outlook
The GBP/USD currency pair underwent another decline on Thursday, driven mostly by weak fundamental data from the UK. However, the decline helped to prolong the consolidation trend, which began three weeks ago. It is yet uncertain whether the 1.28 or the 1.2850 level is the trend's lower boundary, but the 1.30 mark is representing the upper one. As a result, the Cable still has room for another leg down, despite being supported by the weekly S1 and the 20-day SMA demand cluster just under today's opening price. Meanwhile, technical indicators keep insisting that a positive development is due, but that is possible only if the US inflation data disappoints today.
Traders' Sentiment
Traders retain a neutral outlook, with 51% of all open positions still being short. The number of sell orders inched up from 51 to 56%.
USD/JPY Analysis: Muted Ahead Of Inflation Data
'And unfortunately for yen bulls, the weaker yen hasn't led to a pickup in Japanese exports. Until this happens, the yen will likely continue to weaken.' – Marc Chandler, BBH (based on Market Watch)
Pair's Outlook
Despite strong second class US fundamentals yesterday, the Greenback failed to outperform the Yen, due to a drop in yields and stocks. Consequently, the exchange rate fell back under the 114.00 major level, while also putting the second support level, namely the weekly R1, to the test. Downside risks persist today as well, with key inflation data eyed. Disappointment could lead to another significant drop, with the main target being the 113.00 handle, where the 100-day SMA and the monthly R1 rest. On the other hand, technical indicators imply the USD/JPY pair is to edge higher again, in which case the 114.40 mark is still likely to limit the possible gains.
Traders' Sentiment
Traders' sentiment remains bearish at 65%, whereas 55% of all pending orders are to purchase the Buck (previously 51%).
Trade Idea : USD/CHF – Buy at 1.0015
USD/CHF - 1.0077
Most recent candlesticks pattern : N/A
Trend : Near term up
Tenkan-Sen level : 1.0079
Kijun-Sen level : 1.0078
Ichimoku cloud top : 1.0079
Ichimoku cloud bottom : 1.0039
Original strategy :
Buy at 1.0015, Target: 1.0115, Stop: 0.9980
Position : -
Target : -
Stop : -
New strategy :
Buy at 1.0015, Target: 1.0115, Stop: 0.9980
Position : -
Target : -
Stop : -
Dollar’s retreat after marginal rise to 1.0100 yesterday suggests minor consolidation below this level would be seen and pullback to support at 1.0048 cannot be ruled out, however, reckon downside would be limited to 1.0005-10 (38.2% Fibonacci retracement of 0.9859-1.0100) and bring another rise later, above said resistance at 1.0100 would extend recent rise to previous resistance at 1.0108, break there would confirm and extend rise to 1.0130 and then 1.0150-55.
In view of this, would not chase this rise here and we are looking to buy dollar on pullback as 1.0000-10 should limit downside. Below 0.9980 (50% Fibonacci retracement of 0.9859-1.0100) would defer and suggest top is possibly formed but break of previous resistance at 0.9957 is needed to signal top is formed, bring further fall to 0.9920-25, however, previous resistance at 0.9903 should remain intact.
Technical Outlook: Cable Remains In Red After BoE, US Data In Focus
Cable remains at the back foot on Friday after BoE's minutes and weaker than expected UK disappointed traders. The pair is holding just above Thursday's low at 1.2847, being under pressure on weak near-term technicals and rising downside risk after multiple rejection ahead of psychological 1.3000 barrier.
Break below 20SMA at 1.2862, would open 1.2830 (04 May trough), loss of which would generate stronger bearish signal and expose pivotal support at 1.2751 (Fibo 38.2% of 1.2370/1.2986 upleg).
US CPI and Retail Sales data, due later today, are in focus for firmer direction signals, as forecasts are positive and releases at/above would boost the greenback and send pound into deeper correction.
Res: 1.2911, 1.2946, 1.2986, 1.3000
Sup: 1.2847, 1.2830, 1.2770, 1.2750
Trade Idea : GBP/USD – Hold short entered at 1.2900
GBP/USD - 1.2863
Most recent candlesticks pattern : N/A
Trend : Near term up
Tenkan-Sen level : 1.2877
Kijun-Sen level : 1.2899
Ichimoku cloud top : 1.2946
Ichimoku cloud bottom : 1.2946
Original strategy :
Sold at 1.2900, Target: 1.2800, Stop: 1.2935
Position : - Short at 1.2900
Target : - 1.2800
Stop : - 1.2935
New strategy :
Hold short entered at 1.2900, Target: 1.2800, Stop: 1.2935
Position : - Short at 1.2900
Target : - 1.2800
Stop : - 1.2935
As cable has remained under pressure after dropping sharply yesterday, adding credence to our bearish view that top is formed at 1.2991 earlier and consolidation with downside bias remains for further fall to 1.2831 support, break there would provide confirmation and extend the fall from 1.2991 top to 1.2805 and later towards 1.2770 but reckon previous support at 1.2757 would hold from here.
In view of this, we are holding on to our short position entered at 1.2900Above 1.2925-30 would risk test of 1.2950-60 but break there is needed to signal low is formed, bring another bounce towards 1.2988-91 resistance but break of 1.2999-00 (1.236 times projection of 1.2109-1.2616 measuring from 1.2365 and psychological resistance) is needed to revive bullishness.
