Retail Sales strong beat; US Dollar bid continues
Joe Perry September 16, 2021 3:05 PM
This morning’s data gave a boost to the already strong performance in DXY
US Retail Sales for August was much stronger than expected, even with the lower revisions from July’s print. The headline print was +0.7% vs an expectation of -0.8%. However, the July number was revised lower from -1.1% to -1.8%, which nets to a 0.0% print for August (still better than expected). In addition, Retail Sales (ex-Autos) came in at 1.8% vs -0.1% expected. As with the headline number, July’s print was revised lower to -1.0% from -0.4%, which nets to a 1.2% for August (still much better than expected). This is good news for the US economy after the terrible print in July.
As has been the case for much of the last 1 ½ years, good news means a stronger US Dollar as it leads to stronger expectations that the FOMC will announce a taper at its meeting next week. The US Dollar had already been on a tear higher throughout the European session, and it continued after the Retail Sales data. On a 240-minute timeframe, the DXY has traded above previous highs and appears like it will close the current bar above 92.80, which is the neckline for an inverse head and shoulders pattern (with 2 right shoulders) and the 50% retracement level from the August 20th highs to the September 3rd lows.
Source: Tradingview, Stone X
The target for the inverted head and shoulders pattern is near the August 20th highs of 93.72. However, if price is to reach the target, it must first pass through the 61.8% Fibonacci retracement level from the previously mentioned timeframe near 93.04, as well as previous highs from August 27th at 93.18. If the DXY falls back below 92.80, price can fall back to the day’s low near 92.46. Below there, horizontal support is at 92.31 and then the September 3rd lows at 91.95.
As one may expect, with the large move higher in the DXY today, EUR/USD is moving lower. (The Euro makes up 57.6% of the DYX). On the 240-minute timeframe, EUR/USD has broken through several important support levels today, including the 50% retracement and the 61.8% Fibonacci retracement from the August 20th lows to the September 3rd highs. If the pair is to continue moving lower towards the August 20th lows, it will first have to pass through horizontal support at 1.1727 and 1.1702. The RSI is nearing oversold levels and may be ready for an intraday bounce. Horizontal resistance above is at 1.1770 and 1.1804.
Source: Tradingview, Stone X
Although we had much stronger than expected Retail Sales today, the US Dollar had already been going bid since the European session. This morning’s data just gave a boost to the already strong performance on the day. Traders may be positioning themselves for ahead of the FOMC meet week, just in case they announce tapering. EUR/USD acts inversely to the DXY, therefore watch for a reversal in the DXY for a signal that EUR/USD may reverse as well.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.