Market Analysis

U.S inflation and spending data are the key drivers for the greenback this week

The U.S Dollar will be on most traders radars this week after the greenback suffered another heavy intraday sell-off, following Friday’s much weaker than expected monthly jobs report from the American economy. As expectations grow that the Federal Reserve may be forced to cut interest rates in July, the release of key U.S consumer price inflation and retail sales data this week may help to reaffirm the bearish viewpoint towards the U.S economy.

The disappointing 75,000 payrolls headline figure on Friday caused the U.S Dollar Index to fall to its weakest level since late March, as both traders and investors increased bets that the Federal Reserve will almost certainly be reducing interest rates next month. Calls for a fifty basis point rate cut are now coming from leading economists, which is causing major and minor currencies to gain significant ground against the U.S Dollar.

Weak inflation has been a persistent problem for the Federal Reserve since the beginning of the U.S economic recovery, causing FED policymakers to acknowledge that despite robust jobs growth, inflationary pressure has been unusually benign. The release of CPI inflation data on Wednesday is expected to highlight this point, with just a marginal 0.1 percent monthly increase expected.

Traders will be on guard for a weaker inflation number, as this may indeed exacerbate selling in the greenback and reinforce the view that a series of U.S rate cuts are likely coming. It is also worth noting that the United States economy releases PPI inflation numbers on Tuesday, although the CPI measure is by far the larger market mover and the most important inflation measure that traders pay attention to outside of the core PCE number.

The monthly U.S retail sales headline number is also likely to be a market mover for the greenback on Friday, particularly given the fact the February and April saw negative numbers. The negative number seen in April was due to declines in sales of motor vehicles, clothes, appliances, and building materials, it will certainly be interesting to see if this develops into a trend and adds further weight to the overall consensus that U.S economy is indeed experiencing a slowdown.
The Swiss franc has seen a dramatic rise against the U.S Dollar over the last few weeks and has been one of the very best swing-trades for 2019 so far. The bearish reversal from the 1.0200 level appears to be gathering pace, with the USD/CHF pair closing last week well below its 200-day moving average and the 0.9900 handle.


USD/CHF Daily Mountain Chart Source ActivTrader Platform

USD/CHF Daily Mountain Chart | Source: ActivTrader


Intense downside pressure is likely to be place on the USD/CHF pair while price trades below 0.9900 level, while key support is located at the 0.9845 and and 0.9810 levels. Any upside corrections in the USD/CHF pair are likely to find resistance from the 0.9910 and 0.9954 levels, with extended resistance, at 1.0025.


Written by Nathan Batchelor, External Analyst, ActivTrades

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