Dollar mixed after Retail Sales
Knee jerk reactions to mixed retail sales data from US. Dollar remains mixed against majors, bounded in tight range, except remains under pressured against Sterling. US headline retail sales rose by 0.2% in Aug, much better than expectation of a drop of 0.1%. However, ex auto sales rose 0.2% only, below consensus of 0.3%. Export prices and import prices increased 0.4% and 0.8% respectively, higher than consensus of 0.3%increase. Jul business inventories rise 0.6% vs. exp 0.5%, prior revised up to 0.9%
Pound remains firm against dollar and euro today after stronger than expected retails sales in UK which increased 0.3% mom, 4.3% yoy. Last month’s 0.3% mom drop was revised upward to steady with yoy growth revised from 4.0% to 4.3%. GBP/USD rises further to as high as 1.8884. EUR/GBP drops sharply to 0.6733.
SNB continues its quarterly hike and raised rate by 0.25% today, as widely expected keep inflation under control after exports fanned growth and pushed unemployment to the lowest level in three years. Also, as the statement said, “if the economy performs as expected, the SNB will further pursue the gradual adjustment of its monetary policy” signaling further rate hike. Growth forecast for 2006 was increased to “almost 3%” from “a bit above 2.5%”. Consumer inflation was also revised up from 1.2% to 1.3% However, inflation projections for 2007 and 2008 were reduced.
USD/CHF
Daily Pivots: (S1) 1.2476; (P) 1.2512; (R1) 1.2545; More.
USD/CHF dipped sharply to as low as 1.2433 earlier today but rebounded equally strongly afterwards. But still, a top is likely formed at 1.2547 already and now, a firm break above 1.2547 is needed to signal rise from 1.2226 has resumed for upper end of recent established range at 1.2594 (50% retracement of 1.3283 to 1.1919 at 1.2601). Otherwise, further sideway trading will likely follow with bias mildly on the downside.
Also, since mild bearish divergence condition is seen in 4 hours MACD, a short term top could be around the corner, if not formed yet. Break of 1.2393 will indicate the rise from 1.2226 has likely completed and bring deeper decline.
In a bigger picture, with 55 weeks EMA in proximity at 1.2544 too, we remain medium term bearish in USD/CHF as long as upside of upside is limited by 50% retracement of 1.3283 to 1.1919 at 1.2601, and expects further medium term decline to follow after completion of the corrective rebound which started at 1.1919. However, firm break of 1.2182 cluster support is needed to turn short term outlook bearish for a retest of 1.1919 low. Otherwise the corrective rebound from 1.1919 is still considered in progress and risk of further rise remains.
On the upside, above 1.2594 will indicate a much stronger medium term rebound is underway towards 61.8% retracement of 1.3283 to 1.1919 at 1.2762 first).
Read full report (EUR/USD, GBP/USD, USD/CHF, USD/JPY) here.
Shing-Ip Tsui is the founder and CEO of
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