USD Weakens After Adverse Retail Sales And Industrial Output Rates

May 17 21, 11:14 GMT

The USD weakened against most of its counterparts on Friday after the retail sales growth rate and the industrial output growth rate, both for April, as well as the preliminary University of Michigan consumer sentiment underperformed market expectations. It should be noted though that the USD during Monday’s Asian session seems to have found some support and attention seems to turn to fundamentals and to a lesser degree financial releases, while the release of the Fed’s minutes on Wednesday has spurred some market interest. The Aussie on the other hand rallied against the USD on Friday yet seems to retreat during today’s Asian session and we expect the future price action of industrial metals such as iron ore and copper to be the main drivers for today. As for US stockmarkets, Nasdaq jumped on Friday as tech shares were on the lead of a rather broad rally supported by moderated inflation fears, given that the retail sales growth rate accelerated less than what the market expected. Gold prices reached a new three month high in today’s Asian session, as US yields retreated further on Friday, while virus worries also provided support. WTI prices seem to remain relatively stable despite the recovery of a major U.S. pipeline network easing concerns over supply and a new wave of COVID-19 restrictions in Asia fuelling fears of lower demand.

AUD/USD rose on Friday testing the 0.7785 (R1) resistance line yet failed to break it and thus highlighted its importance. It should be noted though that during today’s Asian session the pair tended to retreat. We retain a bias for a sideways motion for the time being, between the 0.7785 (R1) resistance line and the 0.7725 (S1) support line. Please note that RSI indicator below our 4-hour chart is running along the reading of 50, implying a rather indecisive market. Should buyers have the initiative over the pair’s direction, we may see it breaking the 0.7785 (R1) resistance line and aim for the 0.7850 (R2) level. Should aa selling interest be displayed, we may see the pair breaking the 0.7725 (S1) support line and aim for the 0.7665 (S2) level.

Nasdaq on the other hand, kept its rally going breaking the 13300 (S1) resistance line, now turned to support. We intend to keep the bullish outlook for the index as long as it remains above the upward trendline guiding it since the 13th of May. Should the bulls maintain control over the index, we may see Nasdaq breaking the 13575 (R1) resistance level and thus open the way for the 13880 (R2) level. If the bears take over, we may see the index, breaking the upward trendline, the 13300 (S1) support line and aim for the 12960 (S2) level.

Other economic highlights today and the following Asian session:

Today in the American session we note the release of the US NY Fed manufacturing indicator for May, while during tomorrow’s Asian session, we get Japan’s GDP rates for Q1. Please note that Atlanta Fed President Bostic, BoE Tenreyro, BoE member Vlieghe, BoE chief economist Haldane and Dallas Fed President Kaplan are scheduled to speak, while RBA releases the minutes of its last meeting.

As for the rest of the week

On Tuesday we get from the UK the employment data for March, Eurozone’s revised GDP rate for Q1 and from the US the construction data for April. On Wednesday, we get Australia’s wage Price index for Q1, UK’s inflation measures for April, Eurozone’s final HICP rate for April and Canada’s CPI rates for the same month, while the Fed releases the minutes of its last meeting. On Thursday, we note Japan’s machinery orders growth rate and trade data for April, Australia’s employment data for April, the weekly US initial jobless claims figure as well as the Philly Fed Business index. On Friday, we get the preliminary PMI figures for Australia for May, Japan’s CPI rates for April, Japan’s preliminary manufacturing PMI for May, Australia’s preliminary retail sales for April, UK’s retail sales for April US retail sales growth rate for April, the preliminary PMI figures from France, Germany, Eurozone, UK and the US for May as well as Eurozone’s preliminary consumer confidence indicator for May.

AUD/USD H4 Chart