Dollar pressured by PPI/Retail Sales
Dollar was pressured in early US session after disappointing economic data. Oct producer price fell 1.6%, matching the biggest monthly decline on record in 1993, much lower than expectation of 0.5% drop. Core PPI also unexpectedly dropped by 0.9% versus consensus of 0.1% rise. Although Oct headline retail sales dropped 0.2% only, slightly better than expectation of 0.4% drop, ex-auto sales dropped more than expected by 0.4%. Also, Sep’s data was revised downward with headline sales and ex-auto sales adjusted from -0.4% and -0.5% to -0.8% and -1.2% respectively.
Dollar gave back earlier gains against Euro and Sterling. Earlier today, Germany ZEW unexpected dropped further to -28.5 in Nov, from -27.4 as investor confidence continues to deteriorate. Eurozone GDP also grew less than expected by 0.5% in Q3. Sterling has been pressured across the board after disappointment in CPI inflation data which increased 0.2% mom, 2.4% yoy only versus consensus of 0.3% mom, 2.6% yoy.
GBP/USD
Daily Pivots: (S1) 1.8955; (P) 1.9052; (R1) 1.9110;
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Cable’s retreat from 1.9177 has resumed as low as 1.8956 but was supported above 1.8946 support and rebounds strongly in early US session on broad based dollar weakness. However, a break above 1.9049 resistance is needed to confirm retreat from 1.9177 has completed and bring retest of this high. Otherwise, further decline cannot be ruled out.
On the downside, though, we’d expect correction to be contained by 1.8860 resistance turned support (50% retracement of 1.8517 to 1.9177 at 1.8847) and bring rally resumption. On the upside, firm break above 1.9177 resistance will indicate recent rally has resumed for next upside target of 1.9554.
In the bigger picture, current rally from 1.8517 should represent resumption of rise from 1.8090 as well as medium term up trend from 1.7047. Hence further rally should be seen towards next upside target will be 2004 high at 1.9554, with 100% projection of 1.8090 to 1.9142 from 1.8517 at 1.9569. On the downside, a break below 1.8672 support is needed to indicate the rise from 1.8517 has completed. Otherwise, further rally is still expected to follow after consolidation.
Read full report (EUR/USD, GBP/USD, USD/CHF, USD/JPY) here.
Shing-Ip Tsui is the founder and CEO of www.ActionForex.com. ActionForex is set up with the aim to empower individual forex traders by providing insightful contents. Analysis reports, live pivot points on majors and crosses, etc are provided with collection of carefully selected educational articles and free trading ebook downloads.