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US Retail Sales Data Are Mixed

By OFX

The US Dollar maintained its downside bias last week as it followed in tandem the trajectory of equities, plummeting from record highs seen on October 4th. Movements of capital flows into traditional safe-haven assets such as the Japanese Yen as the USD/JPY dropped through the 1.13 handle. The currency pair saw Intraday lows of 1.1190 following softer than expected consumer sentiment before closing the week at 112.10.

The US Dollar Currency Index (DXY) rebounded 0.2% as equities on the local exchange rallied, 1.4% on the S&P 500 and 1.1% on the Dow.

It’s a busy week on the docket as United States retail sales for September is released this morning as initial expectations point towards a boost of 0.4% on a per monthly basis. Retail Sales as a whole released at 0.5%, but, ex autos missed expectations of 0.3 printing a-0.1%. Also published at 8:30 were NY Empire State Manufacturing at 21.1 and Business Inventories at 0.5% in line with expectations.

The Canadian Dollar seesawed its way through Friday's day of trade, having opened the session near 1.3030. There was little to excite investors with the local economic calendar having nothing to release therefore the Loonie took direction from events out of the US.

On the economic data front, the Bank of Canada is to publish its business outlook survey. The survey gives a snapshot view of business executives an optimistic view is good for the CAD, whereas a pessimistic outlook is negative.

From a technical perspective, the USD/CAD pair is currently trading at 1.3025 and will likely continue to see the pair trade between 1.2987 and 1.3071.

Recapping Friday’s session, the EUR/USD fell from 1.1610 to 1.1535 before steadying to levels around 1.1560. It has dipped further into Monday morning trade as we open this morning in North America at 1.1580. The dip is likely due to German Chancellor Angela Merkel’s ally party, the Christian Social Union, performing poorly in the state election on Sunday and surrendering ground to both the greens and the far right AFD parties.

Looking ahead to this week’s key risk events for the Euro, we have US Retail sales on Monday which have the potential to inject further volatility into FX markets. Tuesday then delivers British labor market data in the form of average earnings for August; traders will be watching this closely for any signs of wage inflation as a predictor of future rate hikes by the BOE. Tuesday also sees CPI and trade balance figures out of Italy which is not expected to move markets. The key risk events for the week start on Wednesday as we see the EU Brexit summit kick off and CPI Eurozone CPI measures for September.

On the technical front, EUR/USD technical supports can be seen at 1.1500 while on the flipside, any topside moves in the pair are expected to meet resistance at levels nearer to 1.1569 before 1.1600. The EUR/GBP cross will also be in focus this week, with key resistance seen at 0.8847 and technical supports visible around 0.8700.

The Great British Pound edged marginally lower through trade on Friday as investors looked to capitalize on recent gains amid uncertainty leading into this week’s EU summit. Having rallied strongly through early-week trade on the back of comments from key Brexit negotiators and an inflated sense of optimism; concerns surrounding Irish border checks and domestic political roadblocks forced cable back below 1.31.

Markets despite pushing GBP longs remain wary of extending holdings ahead of talks; pessimistic a deal can be brokered before the month-end deadline. While 80% of the Brexit process appears to be completed, it is the final 20% that will be the hardest to work through and overcome. That said, there is now a renewed hope a deal will be agreed, and we see the door open for significant GBP upside through the coming six months.

Attention today remain with Brexit headlines as the critical driver governing direction.

The Australian Dollar traded within a tight range on Friday moving between a low of 0.7102 and a high of 0.7139. Local Home Loans data that was released had zero impact on the currency despite numbers showed that growth in owner-occupier home loans suffered its most significant fall in about seven years. The value of new owner-occupier mortgages dropped 10.2% to around $20.7 billion, seasonally adjusted, over the year to August.

An active reading of US import prices which were mainly driven by a sharp increase in energy prices kept the lid on the Aussie making any further gains past 0.7135, and we saw the AUD/USD reverse all gains and began heading back south before the NA session ended. There were no local data releases for the AUD; market participants await tonight’s RBA’s monthly minutes.

On the technical front support sits at 0.7085 followed by 0.7040, on the upside, resistance sits at 0.7140 and 0.7175

The New Zealand Dollar closed about 1% higher for the week against a number of currencies despite the declining risk-appetite across other markets. Opening this morning at 0.6505, the Kiwi traded within a tight 25pip range on Friday and remained relatively stagnant to close out the week.

The NZD enjoyed most of its gains last Thursday, with little volatility on Friday to motivate the dollar. The economic calendar was light on Friday, but NZ Finance Minister Robertson did have an interview last night and noted that he’s “not uncomfortable” with the NZD at the moment. He also commented that he believes some would argue that the mid-60’s is probably a more sustainable position. Demand for the Kiwi was also supported from China with the Chinese trade surplus posting a stronger than expected result. While the likely outcome of increased production before the full effects of Tariffs hit, the market was nevertheless buoyed by the news.