Price action remained tame in overnight trading. New Zealand’s headline Retail Sales printed higher than expected, spurring a short-lived upward spike until the markets reversed on the discovery that the inflation-adjusted figure had actually declined to the lowest in 13 years. The calendar is clear for the forthcoming European session, opening the door for momentum-driven trading.
[B][U]Key Overnight Developments[/U]
• New Zealand’s Inflation-Adjusted Retail Sales Reach Record Low
• Empty European Calendar Opens the Door to Forex Volatility
[U]Critical Levels[/U][/B]
The Euro was under pressure overnight, trading firmly below the 1.48 level. DailyFX Chief Strategist Jamie Saettele expects the Euro to correct 1.5083 before an eventual decline to 1.4650. Near-term support stands at 1.4650. Sterling remained in a tight 20-pip range. Support is now at 1.8532, with resistance at 1.8920.
[U]
[B]Asia Session Highlights[/B][/U]
New Zealand’s [B]Retail Sales[/B] figure printed higher than expected, registering at 0.9% in June versus expectations of flat result. The Kiwi dollar initially rallied 30 pips on the release, but the gains were reversed quickly as it became apparent that higher oil prices had distorted the headline figure. Indeed, inflation-adjusted Retail Sales figure contracted -1.5% in the second quarter, reaching the lowest level in at least 13 years. Sales fell -1.2% in the first three months of the year, producing the first back-to-back decline in retail activity in a decade. The metric further confirms the dire state of the economy in the smaller antipodean nation. Overall, the economy shrank -0.3% in the first quarter and is expected to lose a further -0.5% in the second.
[U][B]Euro Session: What to Expect[/B][/U]
The calendar is clear for the forthcoming European session, opening the door for momentum-driven trading. Crude oil prices are once again near $113/barrel, reversing Wednesday’s pop-up. US equity markets advanced higher as Walmart announced a particularly strong set of second-quarter earnings while Fannie Mae and Freddie Mac rallied after regulators approved the troubled lenders to finance larger loans on the bond market. This should see the dollar remain well-supported, with another news-worthy flare up in the Caucasian republic of Georgia likely to accelerate the greenback’s rally. The Dollar tends to attract capital at times of geopolitical tension because the US remains the dominant global military power. That said, the technical outlook sees the Dollar positioned near critical resistance against most of the major pairs, with a lull in the stream of economic data possibly opening the door to a retracement.
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