US session review: Dollar under pressure after weak retail sales

Data released (actual, consensus, previous):                     

12:30    US   NY Empire State Manufacturing Index (Jul)    9.46    5.00    7.84        

12:30    US    Retail Sales (MoM) (Jun)    0.4%    0.8%    0.5%

12:30    US    Retail Sales ex Autos (MoM) (Jun)    0.0%    0.4%    0.3%        

14:00    US    Business Inventories (May)    0.1%    0.0%    0.2%

The greenback pared gains versus the euro after U.S. retail sales rose less than forecast. The dollar was the best-performing major currency over the past six months amid bets the Fed will dial back its asset purchases.

The yen weakened for a second day against the dollar amid speculation the Federal Reserve will reduce monetary stimulus while the Bank of Japan maintains its bond-buying program, which tends to debase a currency.

Financial markets in Japan were closed today in observance of a national holiday.

EURO:

Euro is under pressure. Ex ECB’s Weber said Fed tapering has negative effects on Europe.

-may lead to further reforms in Europe;

-monetary, fiscal policies have reached their limits;

-further ECB rate cuts have only ‘marginal effects’.

EUR/USD  is capped near $1.3060, as retail sales data from the US came lower than expected. Below 1.3000 next support comes at $1.2966 (low Jul.11) ahead of $1.2949 (high Jul.10) and finally $1.2755 (low Jul.1). On the upside, a break above $1.3208 (high Jul.11) would expose $1.3255 (high Jun.21).

POUND:

The pound added against the dollar after Barclays Capital see UK GDP on the up;

-revises forecast for Q2 GDP to 0.6% from 0.4% citing the improving May construction data;

-still keeps 2013 forecast at 1.1%;

-see's tomorrows inflation data rising to 3.1% y/y from 2.7% prior

GBP/USD is currently quoted at $1.5090. Above resistance comes at $1.5300. Below $1.5050 and recent lows support comes at $1.4780 (Feb 28’2010 lows) and $1.4720.

YEN:

With Japanese markets closed Monday for the Marine Day holiday, the yen was likewise range-bound. This week we will see BoJ Monetary Policy Meeting Minutes on Wednesday 17th July.

USD/JPY is kicking off the week sub Y100.00. Support comes at recent lows on YY98.20. Below support comes at Y97.77/70, ahead of Y97.00 (June 25 low). Initial resistance comes at Y101.00 and Y101.50.

COMMODITY CURRENCIES:

Australia’s dollar rose against most major peers after growth in China, its top trade partner, matched economists’ estimates in the second quarter.

DATA AHEAD:

At 22:45 GMT   NZ Consumer Price Index will end the day’s data.

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