EUROPEAN session review: Euro set 7-month high

Data released: 

05:45 GMT Switzerland SECO Economic Forecasts 

06:00 GMT Switzerland Trade Balance (Aug) 1,853.0M 1,475.0M 2,490.6M 

06:00 GMT Switzerland Exports (MoM) (Aug) 12,799.0M _ 18,268.4M 

06:00 GMT Switzerland Imports (MoM) (Aug) 14,652.0M _ 15,777.8M 

07:30 GMT Switzerland SNB Interest Rate Decision (Sep 19) 0% 0% 0% 

08:30 GMT UK Retail Sales (YoY) (Aug) 2.1% 3.3% 3.0% 

08:30 GMT UK Retail Sales (MoM) (Aug) -0.9% 0.4% 1.1% 

08:30 GMT UK Retail Sales ex-Fuel (MoM) (Aug) -1.0% 0.0% 1.2% 

08:30 GMT UK Retail Sales ex-Fuel (YoY) (Aug) 2.3% 3.1% 3.2% 

The dollar index has now reversed almost all of its gains recorded so far in 2013 falling back towards key technical support at around 79.50. 

The market reaction against the greenback has been swift and we expect over the next one to two weeks, longer-term asset managers will keep paring back dollar longs. This suggests EUR/USD and GBP/USD can re-test their highs for the year of 1.37 and 1.64 respectively while USD/JPY stays heavy in its current 96-100 range. 

EURO 

The euro continued to move higher, although the pace of the advance has tempered over the last hours as investors continue to assess latest developments. Even though EUR/USD set a fresh 7-month high of 1.3568 during the European session, some consolidation, and even correction, seems only natural after the sharp rally. 

EUR/USD back to $1.3540. Strong resistance comes at $1.3600 (Feb 5 and 6 highs) with the stronger resistance is near yearly high on $1.3712. Initial support comes at $1.3350 (channel line from Sep 6). Below support is around Sep 13 lows on $1.3250. 

POUND 

The pound retreated after weak retail sales. 

National Statistics informed on Thursday that year-over-year UK Retail Sales grew 2.1% in August, compared with the 3% increase in July and below forecasts of +3.3%. 

On a monthly basis UK Retail Sales dropped 0.9% in August, after growing 1.1% in July and against expectations of increasing 0.4%. 

Annual Retail Sales excluding Fuel climbed 2.3%, down from the 3.2% rise and below market consensus of 3.1% growth. 

GBP/USD retreated from session highs on $1.6145. Above the resistance comes at $1.6180. Initial support is around $1.5960 and $1.5900/$1.5890 (channel line from Sep 6) and $1.5780 (Friday’s lows). 

YEN 

BOJ’s Kuroda said today the BOJ policy clearly having a positive impact on economy and CPI shows broad improvement in price trend. He also noted Japan’s economy can continue moderate recovery and the BOJ will continue QE as long as deemed necessary for price stability. Kuroda added Japan is starting to find its way out of 15 years of deflation. 

USD/JPY fell as low as Y97.80 (earlier broken resistance line from Jul 7) before corrected back to Y98.80. Initial resistance comes at Y98.60 (channel line from Aug 27 broken Wednesday) and Y100.00 (Friday’s highs) and Y100.60 (Sep 11 highs). Below Y97.80 support comes at Y97.40 (trend line from Jun 13) and Y96.80 (Aug 27 lows). 

DATA PREVIEW: 

US data at 12:30 GMT include Q2 Current Account and Initial Jobless Claims.

 

At 14:00 GMT Aug Existing Home Sales may print a decline to 5.25M after 5.39M month earlier, while Sep Philadelphia Fed Manufacturing Survey is expected to rise to 10.0 vs 9.3.

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