Dollar Tumbles on Retails Sales and Risk Aversion

Dollar tumbles further against yen in early US session as retail sales data from US disappoints the markets. Headline retails sales increased just 0.1% in Feb, missing expectations of 0.3% while ex-auto sales dropped -0.1% comparing to expectations of 0.3%. rise. In addition to that, concerns on rising number of defaults in the U.S. sub prime mortgage sector and their potential impact on the broader economy is still weighting down dollar and triggering further risk aversion buying in Yen and Swiss Franc.

Euro was supported by better than expected Germany ZEW investor sentiments which improved to an 8 month high of 5.8, in Mar, up from 2.9 in Feb and much higher than expectation of 3.3. Meanwhile, current condition index broke the winning streak and retreated mildly from 70.9 to 69.2. After all, the indices suggest that the impact of VAT has been a lot smaller than anticipated and businesses in Germany is still doing well. Trade deficit in UK narrowed more than expected to -6.23b, from a downwardly revised -6.95b and much better than expectation of -7b. But Sterling remains pressured, in particular in GBP/JPY and GBP/CHF crosses too.


Daily Pivots: (S1) 1.2202; (P) 1.2276; (R1) 1.2318; More.

USD/CHF’s fall from 1.2354 extends further to as low as 1.2185 in early US session. Break of inner rising trend line (now at 1.2213) confirms that rebound from 1.2108 has already completed at 1.2354 and at this point, further decline is expected to be seen towards 1.2157 support and then 1.2108 low. Touching of 1.2234 support turned resistance will turn intraday outlook consolidative first.

In the bigger picture, since a short term low is already formed at 1.2108,
a firm break of this low is needed to confirm that fall from 1.2571 has resumed. Otherwise, further consolidation and a stronger rebound cannot be ruled out. However, one must note that weekly MACD is still negative and USD/CHF is still being kept below mentioned medium term falling trend line and 55 weeks EMA (now at 1.2437).

Also, the three wave structure of the rebound from 1.2108 indicates that it should merely be consolidation to the whole fall from 1.2571. Hence, further medium term weakness is in still favor. Firm break of 1.2108 will indicate recent fall from 1.2571 has resumed for next downside target of 78.6% retracement of 1.1878 to 1.2571 at 1.2211.

USD/CHF 4 Hours Chart - Learn Forex, Trade Forex, Forex News, Forex Headlines

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Shing-Ip Tsui is the founder and CEO of 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.