Forex: Dollar Rally May Fizzle on In-Line Retail Sales, Confidence Data

Ilya Spivak

Talking Points


  • US Dollar Gains, Aussie and Kiwi Sink Amid Renewed Fed “Taper” Speculation
  • Retail Sales, UofM Confidence Figures in Focus as Markets Build Out FOMC Bets
  • Lasting USD Rally Unlikely Absent Major Upside Surprises on the Data Front


The US Dollar advanced against the major currencies while stocks declined on Asian bourses as the markets’ attention turned to next week’s FOMC policy announcement. The Australian and New Zealand Dollars bore the brunt of the greenback’s recovery, sliding as much as 0.5 and 0.6 percent respectively.


The baseline scenario calls for a $10-15 billion cutback in asset purchases but the path thereafter remains uncertain. That means the updated set of economic forecasts from the rate-setting committee as well as Chairman Ben Bernanke’s press conference following the policy decision are likely to offer traders plenty of fodder for speculation.


For the time being however, the spotlight is on Augusts’ Retail Sales figure and Septembers’ preliminary University of Michigan Consumer Confidence gauge due before the end of the trading week. The former is expected to show receipts rose 0.5 percent from the prior month, an outcome broadly in line with the trend average (0.4 percent). The latter is seen ticking lower for a second consecutive month, albeit modestly so.


On balance, outcomes in line with consensus forecasts are unlikely to materially alter status-quo FOMC expectations, suggesting the Dollar may find it difficult to build significant upward follow-through into the weekend. Needless to say, news-flow that tops economists’ forecasts and thereby argues in favor of a sustained QE reduction cycle into the end of the year is likely to broadly boost the greenback, and vice versa.



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Asia Session:


GMT

CCY

EVENT

ACT

EXP

PREV

22:30

NZD

Business NZ Perf. of Manuf. Index (AUG)

57.5

-

59.5

22:45

NZD

Food Prices (MoM) (AUG)

-0.5%

-

0.5%

1:00

NZD

ANZ Consumer Confidence Index (SEP)

118.8

-

123

1:00

NZD

ANZ Consumer Confidence (MoM) (SEP)

-3.4%

-

2.7%

3:00

NZD

Non Resident Bond Holdings (AUG)

68.3%

-

67.9%

4:30

JPY

Industrial Production (MoM) (JUL F)

3.4%

-

3.2%

4:30

JPY

Industrial Production (YoY) (JUL F)

1.8%

-

1.6%

4:30

JPY

Capacity Utilization (MoM) (JUL)

3.7%

-

-2.3%



Euro Session:


GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

6:45

EUR

Eurozone Finance Ministers Meet in Vilnius

-

-

-

7:15

CHF

Producer & Import Prices (MoM) (AUG)

0.2% (A)

0.0%

Low

7:15

CHF

Producer & Import Prices (YoY) (AUG)

0.2% (A)

0.5%

Low

8:30

EUR

Italian General Government Debt (JUL)

-

2075.1B

Low

8:30

GBP

Construction Output SA (MoM) (JUL)

2.1%

-0.7%

Low

8:30

GBP

Construction Output SA (YoY) (JUL)

1.3%

1.9%

Low

9:00

EUR

Employment (YoY) (2Q)

-

-1.0%

Low

9:00

EUR

Employment (QoQ) (2Q)

-

-0.5%

Low

10:00

EUR

Eurozone FinMin Post-Meeting Press Conf.

-

-

Medium



Critical Levels:


CCY

SUPP 3

SUPP 2

SUPP 1

Pivot Point

RES 1

RES 2

RES 3

EURUSD

1.3160

1.3227

1.3263

1.3294

1.3330

1.3361

1.3428

GBPUSD

1.5679

1.5743

1.5774

1.5807

1.5838

1.5871

1.5935



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


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