The U.S. dollar is starting the new trading week on the defensive, trading lower against all of the major currencies as Friday’s weaker U.S. retail sales data continues to reverberate through the markets.
The EURUSD is up 0.18%, while the GBPUSD is higher by 0.19%. The Japanese yen is also modestly stronger, with the USDJPY down 0.05%. The biggest mover is the Australian dollar, with the AUDUSD up 0.62%.
The AUDUSD move appears to be less about fresh Australian news and more about the combination of broad U.S. dollar selling and a relatively hawkish RBA backdrop. Friday’s disappointing U.S. retail sales report has traders scaling back expectations for another Fed rate hike. The probability of a September increase has fallen to around 30%, from roughly 50% before the data. U.S. yields are modestly lower as a result, helping to put additional pressure on the dollar.
For the Australian dollar, the move is being amplified by the policy divergence between the Fed and RBA. The RBA remains relatively hawkish, while expectations for additional Fed tightening are being pared back. Technically, the price did break above a swing area between 0.7100 and 0.7113 (see red numbered circles and yellow area on the chart below) and the 61.8% at 0.7119.
In today’s Kickstart video, I take a technical look at the EURUSD, USDJPY and GBPUSD, along with the other major currency pairs, and outline the bias, risk levels and targets — the three things every trader should be aware of as the new trading week gets underway.
Overnight, the economic news was highlighted by a batch of weaker-than-expected data out of China (which does not support the AUDUSD run higher). Fixed Asset Investment fell 6.7% YTD/Y, weaker than the -6.2% estimate and -5.7% previously. Industrial Production slowed to 4.5% Y/Y versus 5.0% expected and 5.3% previously, while Retail Sales rose just 0.6% Y/Y, well below the 1.5% forecast and down from 1.0% previously.
China’s unemployment rate also ticked higher to 5.2% from 5.0%, above the 5.1% estimate, while New Home Prices fell 0.18% M/M after a 0.15% decline previously. Overall, the data continues to point to softness in domestic demand, investment and the property sector.
In the U.S. stock market, futures are mixed, but technology shares are outperforming:
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Dow: -130 points
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S&P: +3.49 points
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Nasdaq 100: +150 points
Sandisk continues it’s run to the upside ignited after the companies Investor Day last week (see post here). Shares are up 4.1% in premarket trading. Nvidia shares are up 0.71% as it and OpenAI look to finalize a data center in Ohio. Micron shares are up 2.92%, Marvell shares are up 1.68%. Bloom Energy is up 4.29% recouping the 2.66% fall on Friday
In the U.S. debt market, Treasury yields are modestly lower across the curve:
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2-year: 4.1626%, down 0.8 basis points
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5-year: 4.3568%, down 0.7 basis points
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10-year: 4.6882%, down 0.8 basis points
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30-year: 5.2635%, down 0.3 basis points
The moves are relatively modest, but the lower yields are consistent with the softer dollar and the scaling back of expectations for additional Fed tightening. The expectation for a September hike is down to 30%.
In other markets, crude oil is up $0.16 at $82.56, after trading as high as $83.23 and as low as $81.50.
Gold is also benefiting from the softer dollar, rising $26.21, or 0.60%, to $4,402.37, while silver is up 1.64% at $65.77. Bitcoin is up 1.26% at $63,626.
On today’s North American economic calendar, the main event will be Canadian CPI at 8:30 AM ET. Headline CPI is expected to rise 0.4% M/M, after falling 0.4% previously. Median CPI is expected at 2.0% Y/Y, up from 1.9%, while trimmed CPI is forecast to remain at 1.8%.
Also at 8:30 AM ET, the U.S. Empire State Manufacturing Index is expected at 10.6, down from 15.6 previously.
At 10:00 AM ET, the NAHB Housing Market Index is expected to edge lower to 33 from 34.
With the U.S. economic calendar relatively light, Friday’s weaker retail sales report, the repricing of Fed expectations and the resulting moves in the dollar and yields should remain key drivers as North American traders enter for the day.
This article was written by Greg Michalowski at investinglive.com.