USD Firms On Favourable Financial Data

Jun 17 20, 10:22 GMT

The USD strengthened against a number of its counterparts yesterday and during today’s Asian session as the US retail sales growth rate for May outperformed expectations reaching 17.7% mom. At the same time the Aussie tended to weaken substantially as a commodity currency which is quite risk sensitive to the concerns about the coronavirus outbreak in China. The recent incident at the Indian-Sino border resulting in 20 Indian soldiers being reportedly killed, also tended to create worries. We plan to closely monitor the escalation of the tensions in the Indian-Sino relationships, as it threatens the stability of the area. On another note it should be mentioned that as was expected, the Fed’s Chairman Powell in his testimony before the US Senate, tended to cool off rosy expectations for the US economy, as he stated that despite signs of stabilization, risks of long-term economic damage are substantial. The Fed’s Chair also warned that investors should not overreact to surprisingly good economic data like the May retail sales growth rate. Also, we would like to note that the Fed’s Chair implied the need for more fiscal stimulus quite subtly, avoiding any political confrontation. We could see the USD being more data driven in the next sessions as the question of whether the US economy’s recovery will be V shaped intensified and market participants may be craving for more clues. Also, the USD could be affected by Powell’s testimony before the US House of Representatives, while AUD traders may be eyeing May’s employment data due out tomorrow in the Asian session. AUD/USD dropped yesterday after unsuccessfully trying to break above the 0.6940 (R1) resistance line. After yesterday’s movement, our view for a sideways motion between the 0.6840 (S1) and the 0.6940 (R1) lines tends to strengthen, yet any clear breach of the prementioned boundaries, could prompt a revision of the pair’s outlook. If the selling momentum persists, we could see the pair breaking the 0.6840 (S1) line and aim for the 0.6750 (S2) level. If the pair’s long positions are favored by the market, AUD/USD could aim if not break the 0.6940 (R1) line, aiming for the 0.7025 (R2) level.

CAD strengthens on improved economic outlook expectations

The Loonie remained largely unchanged against the USD yesterday, despite the release of the astonishing US retail sales growth rate for May. Analysts tended to note that market’s expectations for the outlook for the Canadian economy, seem to improve providing support for the Loonie. It was characteristic that the new BoC governor Tiff Macklem, in his first public appearance stated yesterday that the bank would provide an updated outlook for output and inflation at the next meeting of the bank in about one-month time. Macklem also pledged that the bank remains focused on providing monetary stimulus and delivering low interest rates to support the recovery. We could see CAD traders focusing on the release of May’s inflation rates due out today, while oil prices seem to have entered a sideways motion in the past few days. USD/CAD maintained a largely sideways motion yesterday, just above the 1.3520 (S1) support line. We could see USD/CAD maintaining a sideways direction, before deciding its next leg. If the bulls take over the initiative over the pair’s direction, USD/CAD could break the 1.3620 (R1) line and aim for the 1.3730 (R2) level. If the bears prevail, the pair could break the 1.3520 (S1) support line aiming for the 1.3425 (S2) level.

Other economic highlights today and early tomorrow

Today during the European session, we get UK’s inflation measures for May, as well as Eurozone’s final HICP rates for May. In the American session, we get the US number of housing starts and building permits for May, as well as Canada’s inflation data for May and the EIA weekly crude oil inventories figure. During tomorrow’s Asian session, we get New Zealand’s GDP rate for Q1 as well as Australia’s employment data for May. Once again please note Fed Chief’s testimony before the US House of Representatives, while also note that Atlanta Fed President Bostic as well as Cleveland Fed President Mester are also scheduled to speak.

AUD/USD 4 Hour Chart