US Dollar Flirts with 1.1800 as Retail Sales Disappoint


Sharp job losses across the Eurozone weighed on the single European currency, while the Japanese yen benefitted from a broader risk-off sentiment



The US dollar is trading in a tight range against its major counterparts with the euro stabilising just above 1.08 as of writing. Retail sales figures from the US were not overtly optimistic as a lower than expected print at +1.2% was registered. Meanwhile, EU jobless numbers disappointed, opening a move to the downside that so far has been contained.

 

A move lower in the EURUSD pair was contained by bids that emerged below 1.0790. After the release of the US data and the retail sales disappointment, the rally extended to 1.0835 as of writing. The emergence of sellers around that level has so far contained the rally, and the pair remains vulnerable to another move for a test of the 1.0785-90 area were bids were concentrated earlier this morning.


EURUSD Chart 14082020Source: TradingView & ThinkMarkets
 

Options expirations at 1.0850 and above could attracts some interest into the London fix, as traders refocus on fresh catalysts next week. The US Fed will be releasing minutes from its latest meeting on Wednesday, while the ECB will do the same on Thursday. The July FOMC meeting was loose on events and the EURUSD could see a fresh bout of selling assuming no new information gets released in the post-meeting document.

 

The GBPUSD tested the upside and rose above the 1.3130 peak reached on Wednesday as shorts took to the exits in the aftermath of weak the above-mentioned US retail sales data. The move stalled around the 1.3140 level where offers knocked the pair down back to yesterday\s high at 1.3120. Further selling could pressure the GBPUSD pair back below the 1.3100 level for another test of 1.3050 and 1.3000 levels.


USDJPY Chart 14082020
Source: TradingView & ThinkMarkets

 

The USDJPY pair extended a move lower amid broad-based buying of the Japanese currency due to a risk-off sentiment which started in Asia with disappointing data from China. Industrial production was reported higher by 4.8% amid expectations for a stronger rise of 5.1%. Moreover retail sales dropped by 1.1% vs expectations for a flat reading.


USDJPY Chart 14082020

 

Tuesday’s pullback low in the 106.40 area serves as near-term support, while bears are battling to break through bids near the 106.50 level. A break lower opens a move towards 106.20 and 106.00. Assuming US dollar bulls remain in control, the key level to watch on the upside is 107.00. Having been tested three times, stops above should open another leg higher towards 107.30 and 107.50.

 

Fundamental News

 

US Q3 GDP is forecasted by Fed Watchers to come in at +19.1%, a figure which is markedly better than the previously expected. At the same time the NY Fed’s GDP nowcast is pointing to a 14.8% print (up 0.2% from previous reports).

 

A resurgence in new cases in Spain and France has investors weary of another wave of COVID-19 across Europe. The UK has added visitors from France to a list of countries which require the persons arriving from them to remain in quarantine for 14 days.

 

Overall, the US dollar regained some footing this week only against the Japanese yen and the New Zealand dollar. A pickup in real yields inspired some USD buying earlier in the week, but the pickup remained tepid towards the end of the week despite a sub-million mark for weekly jobless claims.



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