Analysts said the Dollar found some support as investors were becoming increasingly convinced the Federal Reserve will not cut interest rates any time soon. That view was reinforced by the Fed’s statement on Wednesday in which it said it remains focused on seeing price pressure ease more, although it kept interest rates steady at 5.25%.
Data showed on Friday that US retail sales fell 0.2% in April, while Producer Prices rose 0.7% and unchanged excluding food and energy costs.
Japanese wholesale prices rose more than expected in April, keeping the Bank of Japan on track for an interest rate increase later this year. Expectations are growing for the BoJ to lift rates to 0.75% from the current 0.5% in the third quarter.
News and Events:
The Dollar slipped against the Euro on Friday, weighed down by a surprise decline in US retail sales and benign Core Producer Prices, which bolstered the view the economy is losing momentum. Despite the decline, the Dollar maintained narrow ranges and analysts said the currency found some support as investors were becoming increasingly convinced the Federal Reserve will not cut interest rates any time soon. That view was reinforced by the Fed’s statement on Wednesday in which it said it remains focused on seeing price pressure ease more, although it kept interest rates steady at 5.25%. Markets were careful not to push the Euro significantly higher on Friday, given the Dollar’s persistent strength last week on the back of soft global equity markets, which has led investors to cut back on their exposure to risk.
Data showed on Friday that US retail sales fell 0.2% in April, while Producer Prices rose 0.7% and unchanged excluding food and energy costs.
EurUsd traded up 0.35% to 1.3524 while UsdJpy turned higher to 120.20 +0.25%. The Dollar’s recovery against the Yen was mainly fueled by gains in the Euro versus the Yen. EurJpy traded last 162.56 up 0.6%. GbpUsd went up 0.13% to 1.9814, down 0.55% for the week.
Earlier, the Yen briefly edged up against the Dollar after data showing Japanese wholesale prices rose more than expected in April, keeping the Bank of Japan on track for an interest rate increase later this year. Expectations are growing for the BoJ to lift rates to 0.75% from the current 0.5% in the third quarter, with swap contracts on the overnight call rate pricing in a roughly 80% chance of a move in September.
Now, the focus is on comments from Dallas Fed President Richard Fisher and Atlanta Fed’s Dennis Lockhart who are speaking at separate events on Monday ahead of US Consumer Prices data and Fed Chairman Ben Bernanke’s speech later this week.
Today’s Key Issues (time in GMT):
08.30 GB April PPI Input 1% vs 1.2% (MoM)
08.30 GB April PPI Input 0% vs 0.7% (YoY)
08.30 GB April PPI Output 0.5% vs 0.3% (MoM)
08.30 GB April PPI Output 2.5% vs 2.7% (YoY)
08.30 GB April PPI Output Core 0.3% vs 0.4% (MoM)
08.30 GB April PPI Output Core 2.7% vs 2.9% (YoY)
09.00 Euro March Euro-zone Industrial Production 0.3% vs 0.6% (MoM)
14.30 GB March Leading Indicator Index
20.00 US Fed’s Fisher speaks in Washington on Service sector
The Risk Today:
EurUsd remains heavy and maintains its focus on the 1.3442 to 1.3402 congestion zone. A break there would open the door toward the 1.3370 area (38.2% retracement of the 1.2865-1.3683 rise). Only a move above the top of congestion in the 1.3568 area would stop short-term bear trend and open the door to 1.3623 resistance and 1.3750 trendline.
GbpUsd has violated support at 1.9771 (38.2% retracement of the 1.9184-2.0134 rise). This exposes the next support at 1.9710, April 11 low. Only a move above last week’s 2.0000 high would damage the short-run bear move from the mid-April 2.0133 high.
UsdJpy has established a trading range over the past two weeks from support at 118.90 to resistance at 120.54. Only a breakout from this range would likely establish direction.
UsdChf has staged a notable recovery from last Monday’s 1.2083 low, violating May 2 high at 1.2191. But so far, it has not been able to make much progress beyond this former barrier, still holding below the next important resistance at the 1.2285 April 9 high. Initial support is around last Wednesday’s 1.2142 low.
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Resistance and Support:
By Jean-Claude Braha - ACM Advanced Currency Markets, Geneva, Switzerland