Mid-Day Report: Dollar Retreats Further on Poor Retail Sales

Market Overview | Written by ActionForex.com | Sep 12 08 13:35 GMT |

Dollar retreats further against most major currencies in early US session after disappointing retail sales. Headline sales unexpectedly dropped for the second consecutive month by -0.3% in Aug versus expectation of 0.2% growth. Jul's data was also revised down from -0.1% to -0.5%. Ex auto sales dropped sharply by -0.7% versus expectation of -0.2%. PPI inflation was also tamer than expected in Aug. Headline PPI dropped -0.9% versus consensus of -0.5%. Yoy rate retreated back from 9.8% to 9.6%. Core PPI rose 0.2% with yoy rate up from 3.5% to 3.6%. Dollar index retreats further to 79.38. As pointed out earlier today, the greenback might be turning around considering that it's being held by key medium term resistance against Euro, Sterling, Loonie, Oil and Gold. While there is no confirmation yet, an intraday top should at least be formed and further retreat in dollar is in favor as the week closes. Other data released today saw Eurozone industrial production dropped more than expected by -0.3% in Jul, dragging yoy rate sharply lower to -1.7%. Q2 employment grew 0.2% qoq, 1.2% yoy. Japanese Q2 GDP annualized growth. was revised slightly higher from -4.0% to -3.0%. Industrial production was up from 2.0% to 2.4% yoy in Jul. New Zealand retail sales dropped more than expected by -0.8% in Jul. GBP/USD Mid-Day Outlook Daily Pivots: (S1) 1.7483; (P) 1.7537; (R1) 1.7631; More Cable's recovery from 1.7445 continues today and extends further to as high as 1.7794 so far. While the rebound from 1.7445 is strong, there is no confirmation of a short term bottom yet. Another fall is still mildly in favor as long as 1.7974 resistance holds. However, break of 1.7974 will confirm that the decline from 2.0158 has made a bottom at 1.7445, after being supported slightly above medium term support of 50% retracement of 1.3680 to 2.1161 at 1.7421, on bullish convergence condition in 4 hours MACD. In such case, stronger rebound should be seen to resistance zone of 1.8512 and 1.8794 to correct the decline from 2.0158 before resuming the down trend. In the bigger picture, medium term fall from 2.1161 (07 high) is still in progress and should be targeting next key support at 1.7047 first. On the upside, break of 1.7974 resistance will indicate that a short term bottom is finally formed and bring stronger rebound and longer consolidation. But upside should be limited well below 1.9337 support turned resistance and bring another fall. In the longer term picture, last week's development further confirms that a long term reversal has happened at 2.1161 with monthly MACD turning negative and RSI diving into oversold region. The impulsive nature and the scale of the fall from 2.1161 also provides strong evidence to the case of the start of a long term down trend. Next downside target will be 61.8% retracement of 1.3680 to 2.1161 at 1.6538. Break of 2.0158 resistance is needed to invalidate this view.

Economic Indicators Update

GMT	Ccy	Events	Actual	Consensus	Previous	Revised
22:45	NZD	New Zealand Retail sales M/M Jul	-0.80%	-0.30%	0.90%
23:50	JPY	Japan GDP Q/Q Q2	-0.70%	-1.00%	-0.60%
23:50	JPY	Japan GDP annualised Q2	-3.00%	-4.00%	-2.40%
04:30	JPY	Japan Capacity utilisation Jul	1.40%	N/A	1.70%
04:30	JPY	Japan Industrial prod'n M/M Jul	1.30%	N/A	0.90%
04:30	JPY	Japan Industrial prod'n Y/Y Jul	2.40%	N/A	2.00%
09:00	EUR	Eurozone Employment Q/Q Q2	0.20%	N/A	0.30%
09:00	EUR	Eurozone Employment Y/Y Q2	1.20%	N/A	1.60%
09:00	EUR	Eurozone Industrial prod'n M/M Jul	-0.30%	-0.20%	0.00%	-0.20%
09:00	EUR	Eurozone Industrial prod'n Y/Y Jul	-1.70%	-0.70%	-0.50%	-0.80%
12:30	CAD	Canada Capacity utilisation Q2	78.90%	79.30%	79.80%	79.60%
12:30	USD	U.S. PPI M/M Aug	-0.90%	-0.50%	1.20%
12:30	USD	U.S. PPI Y/Y Aug	9.60%	10.20%	9.80%
12:30	USD	U.S. PPI core M/M Aug	0.20%	0.20%	0.70%
12:30	USD	U.S. PPI core Y/Y Aug	3.60%	3.70%	3.50%
12:30	USD	U.S. Retail sales M/M Aug	-0.30%	0.20%	-0.10%	-0.50%
12:30	USD	U.S. Retail sales less auto M/M Aug	-0.70%	-0.20%	0.40%	0.30%
13:55	USD	U.S. U. Michigan survey Prel. Sep		64	63
14:00	USD	U.S. Business inventories Jul		0.50%	0.70%