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Dollar Hits 2-Month Low vs. Yen, Eyes Retail Sales Data for Help

By , Currency Strategist
13 June 2013 08:35 GMT

The US Dollar looks to May’s Retail Sales report for Fed stimulus reduction clues after hitting a two-month low against the Japanese Yen amid risk aversion.

Talking Points

  • Yen Soars, Aussie and Kiwi Dollars Drop as Risk Aversion Strikes in Asia
  • Markets Look to May’s US Retail Sales Data to Guide Fed QE Taper Bets

The Japanese Yen outperformed while the yield-sensitive Australian and New Zealand Dollars plunged on the back of carry trade liquidation and flight-to-safety capital flows as risk aversion struck Asian markets anew. The MSCI Asia Pacific benchmark stock index fell nearly 3 percent en route to setting a year-to-date low. Japan’s shares again led the way lower among the region’s major bourses, with the Nikkei 225 shedding a staggering 6.35 percent.

The rout followed a dismal day on Wall Street that was compounded as the World Bank downgraded its economic growth outlook. The international lender said global recovery is “hesitant and uneven”, trimming its 2013 GDP expansion forecast to 2.2 percent from 2.4 percent predicted in January. The Kiwi bore the brunt of the selloff after the RBNZ said it intends to keep interest rates unchanged through the rest of the year despite expectations of rising trend in CPI inflation.

Looking ahead, all eyes are on May’s US Retail Sales report. Expectations call for receipts to rise 0.4 percent, marking an improvement from the 0.1 percent increase recorded in the prior month. Traders will interpret the outcome in terms of its implications for the timing of a cutback in the size of the Federal Reserve’s monthly asset purchases.

A strong outcome is likely to stoke expectations for a relatively sooner cutback in stimulus efforts, offering support to the US Dollar against most its major counterparts. USDJPY and to some extent USDCHF may prove to be exceptions as the negative risk appetite implications of a less accommodative FOMC weigh down the sentiment-linked pairs. Needless to say, a soft result will probably produce the opposite dynamic.

Capitalize on Shifts in Market Mood with the DailyFX Speculative Sentiment Index

Asia Session:

GMT

CCY

EVENT

ACT

EXP

PREV

21:00

NZD

Reserve Bank of New Zealand Rate Decision

2.50%

2.50%

2.50%

1:00

AUD

Consumer Inflation Expectation (JUN)

2.3%

-

2.3%

1:30

AUD

Employment Change (MAY)

1.1K

-10.0K

45.0K

1:30

AUD

Unemployment Rate (MAY)

5.5%

5.6%

5.5%

1:30

AUD

Part Time Employment Change (MAY)

6.4K

-

15.3K

1:30

AUD

Full Time Employment Change (MAY)

-5.3K

-

29.8K

1:30

AUD

Participation Rate (MAY)

65.2%

65.2%

65.3%

1:30

JPY

BOJ’s Shirai Holds Press Conference

-

-

-

Euro Session:

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

6:00

EUR

German Wholesale Price Index (YoY) (MAY)

-0.1% (A)

-0.4%

Low

6:00

EUR

German Wholesale Price Index (MoM) (MAY)

-0.4% (A)

-0.2%

Low

7:15

CHF

Producer & Import Prices (YoY) (MAY)

-0.2% (A)

-0.1%

Low

7:15

CHF

Producer & Import Prices (MoM) (MAY)

-0.3% (A)

0.2%

Low

8:00

EUR

ECB Publishes Monthly Report

-

-

Medium

Critical Levels:

CCY

SUPPORT

RESISTANCE

EURUSD

1.3283

1.3414

GBPUSD

1.5605

1.5709

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
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13 June 2013 08:35 GMT