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British Pound Gains After Retail Sales, Dollar Down Overnight; US CPI Ahead

British Pound Gains After Retail Sales, Dollar Down Overnight; US CPI Ahead

Christopher Vecchio, CFA, Senior Strategist

INTRADAY PERFORMANCE UPDATE: 09:30 GMT

MAJORS

AUD

CAD

CHF

EUR

GBP

JPY

NZD

(vs USD)

+0.64%

+0.32%

+0.18%

+0.23%

+0.50%

+0.33%

+0.73%

Dow Jones FXCM Dollar Index (Ticker: USDOLLAR): -0.29% (+0.15%prior 5-days)

ASIA/EUROPE FOREX NEWS WRAP

More good news out of the United Kingdom this morning with the July Retail Sales report crushing expectations, and quickly elevating the British Pound to an eight-week high against the US Dollar. Unquestionably, data out of the UK has been the best among the currencies covered by DailyFX Research the past two-months, underpinning a swift turnaround in the Sterling’s fundamentals.

Even as the British Pound adds to its recent gains, it cannot take claim of top performer on the day, That instead goes to the New Zealand Dollar, whose neighbor the Australian Dollar is in a close second, up by +0.73% and +0.64% against the US Dollar respectively.

I believe that the broad US Dollar weakness, and thus prevailing favor towards the commodity – higher yielding – currencies is no coincidence in light of St. Louis Fed President James Bullard’s comments on inflation yesterday and the upcoming July US Consumer Price Index today.

President Bullard’s main critique of the Fed’s shift – most visible by his dissent at the June FOMC meeting – has been that it threatens to undermine the Fed’s credibility on inflation. That is to say, with inflation running so low, the Fed’s dovish credentials may be at stake (which would render QE a hapless exercise); and therefore any exit from QE3 is premature.

We thus turn to the US CPI report for further direction on the US Dollar, which has come off across the board. Another soft CPI print could be a metaphorical nail in the coffin for a ‘Septaper’; but a surprise to the upside (perhaps resulting from improved July consumption figures) would restore any lost confidence and help the US Dollar continue its rebound from a two-month low.

GBPUSD 5-min Chart: Thursday, August 15, 2013 Intraday

British_Pound_Gains_After_Retail_Sales_Dollar_Down_Overnight_US_CPI_Ahead_body_x0000_i1027.png, British Pound Gains After Retail Sales, Dollar Down Overnight; US CPI Ahead

Read more: Point, Taper: Improved July Retail Sales Report Lifts US Dollar as Yields Jump

ECONOMIC CALENDAR – UPCOMING NORTH AMERICAN SESSION

British_Pound_Gains_After_Retail_Sales_Dollar_Down_Overnight_US_CPI_Ahead_body_Picture_1.png, British Pound Gains After Retail Sales, Dollar Down Overnight; US CPI Ahead

See the DailyFX Economic Calendar for a full list, timetable, and consensus forecasts for upcoming economic indicators. Want the forecasts to appear right on your charts? Download the DailyFX News App.

TECHNICAL ANALYSIS – CHART OF THE DAY

British_Pound_Gains_After_Retail_Sales_Dollar_Down_Overnight_US_CPI_Ahead_body_x0000_i1029.png, British Pound Gains After Retail Sales, Dollar Down Overnight; US CPI Ahead

USDJPY – The overbought readings in both H4 RSI and Slow Stochastics (5,3,3,) have been resolved but only little downside was produced, with price maintaining ¥98.00. Accordingly, with H4 candles finding support at the conflux of the 50% Fibonacci retracement from the June low to July high and the 21-/55-EMA bullish crossover at 97.50/70, the next leg higher looks ready to begin. The Bullish Falling Wedge pattern first identified on Sunday night remains valid and points to 99.80/100.00.

--- Written by Christopher Vecchio, Currency Analyst

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

To be added to Christopher’s e-mail distribution list, please fill out this form

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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