Market Analysis

Greenback’s recovery hinges on strong U.S retail sales number

U.S retail sales data for the month of June headlines the economic calendar this week, with most economists predicting that U.S retail sales will expand by a modest 0.3 percent. U.S retail sales have been increasingly difficult to predict, with the headline number fluctuating between positive and negative for several months. Federal Reserve Chair Jerome Powell said last week that the U.S central bank was still monitoring a host of U.S economic data before they meet to decide on rates on July 31st. Market participants will be all too aware that a much better-than-expected U.S retail sales headline number could cast a cloud over the expected interest rates cut later this month.

A key focus will also be placed upon the June core retail sale headline number, after taking out automobile sales and gasoline and if indeed core retail sales can start to rebound strongly. Economists tend to place great emphasis on core retail sales, as it provides a clearer indication of the state of the U.S consumer and economy. Leading up to the retail sales release on Tuesday the U.S economy will release the New York empire state manufacturing index, which has seen a steady decline due to the ongoing weakness in the U.S manufacturing sector. FOMC non-voting member Raphael Bostic will also be delivering a scheduled speech just prior to the retail sales releases on Tuesday.

Next week and the days leading up to to the rate decision will also be crucial as we see U.S manufacturing, housing, and jobs data and also the Federal Reserve’s preferred measure of domestic inflation, core personal consumption expenditure being released. The U.S Dollar index finished the former trading week on the back foot, as the greenback continued to lose momentum after the better than expected U.S CPI inflation numbers. The trading action has recently focused around the U.S Dollar index’s 200-day moving average, although demand above this key technical metric currently looks fairly weak.


USD/JPY Mountain Chart Source ActivTrader Platform

USD/JPY Mountain Chart | Source: ActivTrader 


The U.S Dollar has failed to rally against the Japanese yen, with the pair suffering a swift technical rejection from the 109.00 handle last week. Bulls will need to start to gain momentum back above the 108.60 level this week to attract fresh buying interest. Key support is currently found at the 107.40 and 107.00 level, while major resistance is located at the 109.00 and 110.00 levels.


Written by Nathan Batchelor, External Analyst, ActivTrades

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