FOREX NEWS: US DOLLAR BOOSTED BY RETAIL SALES. KEY SUPPORT THREATENED
Forex News: The U.S. Retail Sales posted a change of 0.6%, better than the anticipated 0.3%, while the CORE version posted a 0.5% change (anticipated 0.3%). This strengthened the US Dollar throughout yesterday’s trading session and the pair broke support.
The uptrend showed signs of weakness when it failed to make another higher high and instead printed a lower high at 1.1840. This fact combined with yesterday’s break of 1.1713, suggests that the pair might be entering a bearish phase (not necessarily a downtrend) and makes us anticipate a touch of 1.1650 in the near future. Keep in mind that the last candle on the chart above shows a long wick, which is a sign of rejection and the Relative Strength Index is approaching oversold, so a move to the upside is not out of the question.
At 9:00 am GMT we take a look at the state of Eurozone’s economy with the release of the Flash version of the Gross Domestic Product. This is the second version in a series of three, so the impact is medium, but it shouldn’t be overlooked. The forecast is a change of 0.6% and usually a higher value strengthens the currency, showing a thriving economy.
On the US Dollar side we have the FOMC Meeting Minutes, scheduled at 6:00 pm GMT. The document contains details of the latest FOMC meeting, but also insights into the reasons that determined the latest rate decision. Sometimes the document also contains hints about future rate changes, and that’s when the impact is the highest.
Yesterday the British inflation numbers missed the market consensus of 2.7%, posting a reading of 2.6%. This fact combined with US Dollar strength generated by the U.S. Retail Sales, triggered a strong drop into key support.
After the break of the horizontal channel formed by 1.3030 resistance and 1.2950 support, the pair continued to move strongly south, reaching the key support at 1.2850. We expect to see a bounce/retracement around this area considering that the Relative Strength Index is already oversold and that price travelled a long distance. The bias is bearish but the sellers are facing an important support at 1.2770 if 1.2850 is broken.
At 8:30 am GMT the British Average Earnings Index is released, showing the changes in the price paid by businesses for labor. The indicator has inflationary implications because if businesses pay more, they will probably charge more for their goods and services to cover the cost of labor. The forecast is 1.8% and usually a higher value strengthens the Pound.