Will UK retail sales end the GBP bullish surge ?
Economical News
USD
The USD weakness after the G7 meeting has given the green light in terms of USD bears and we can see an acceleration of the USD sales. Investors are focusing on the growing interest rate differential between the US and other parts of the world, and the market predicts a continuation of the USD sell off until we will see some shifts of those expectations.
The USD weakness at this point is justified by the economic data which has been coming through. It is a period of inconsistency in economic growth's around the globe, as we notice a pull back in growth in the US and a pick up of Europe and China. It is a shift toward Europe and this momentum will continue also in the future.
Yesterday the USD weakened against the JPY, after stronger than expected GDP data came out in China. The USD will continue to drift lower, getting to some lower levels especially in the major crosses.
EUR
Yesterday, the EUR continued hovering near two-year highs , less than one US cent off its all-time record, after earlier this week the ECB reiterated that in June another interest rate increase for the 13-nation Euro zone was very probable. The ECB said in its April bulletin that it was monitoring price risks "very closely,' a term that analysts have come to see as tactical reference to a rate increase within one or two months. Higher interest rates, used to combat inflation, can bolster a currency by making certain types of investments more attractive. In Yesterday afternoons European trading the EUR rose to 1.3616 against the USD, a level not seen since December 2004, before falling back to 1.3593 level. The German PPI was reported at 0.3%, which was slightly below the market expectation of 0.4%.Today the only significant news coming out of the Euro zone is the UK monthly retail sales data ,which is important, especially as there are uncertainties over underlying consumer spending trends.
The BRC retail sales data suggested that March spending was strong which should be reflected in the monthly sales report, but consumer confidence levels remain generally subdued and there have been some significant profit warnings in the consumer sector.
Volatility will remain a significant risk, especially as there have been monthly swings of more than 1.0% in four of the last 6 monthly readings. (Attached chart shows monthly changes for the past two years). Sterling is liable to react strongly if there is another monthly increase or decrease in excess of 1.0%.
Today the EUR will continue on its bullish path, targeting its all time high of 1.3667 against the USD, as it seems that there is nothing to hold back the positive momentum of the EUR.
JPY
JPY up on the Chinese market data. China economy continued to expand in the first quarter to 11.1% and the foreign market has been affected by concerns about policy reaction in China due to the strong GDP data.
The JPY edges on concerns that Beijing may hike interest rates to cool its economy, and those concerns caused the JPY to climb overnight as investors began to unwind JPY carry trades.
International investors as well as local savers in Japan had been borrowing in low yielding terms and investing overseas, and regarding the hike up that we have noticed overnight was due to, the China's equity market, which soldoff by 4.5% and this movement was a reminder of the very sharp set off that we saw early in March. The expectations are that the volatility will remain high, the unwinding of the JPY carry trading any time soon, and it looks like the bank of Japan will be raising interests rates later this summer and push the JPY back upwards.
Technical Analysis
EUR/USD
This pair is in an uptrend supported by 1 hour exponential moving averages, The volatility is low and Bollinger bands are flat. The 4 hour trend direction is bullish and adds pressure on the EURUSD. The price will consolidate and find a resistance below 1.3645
GBP/USD
uptrend supported by 1 hour exponential moving averages, however there is some consolidation after the last bullish movement. The volatility is low. Bollinger bands are flat, The 4 hour trend is bullish. The price will continue to consolidate and range between 2.0000 and 2.010.
USD/JPY
Range trading between 118.20 and 119 has been spotted as this pair moves without a trend and swings around the exponential moving averages (EMA 50 and 100). The volatility is low. At the moment the trend is a bullish. The price will likely range between 117.50 / 118.95.
USD/CHF
Has started to trade heavily this week in line with generalized USD weakness. The key support lies at 1.2030 are supporting the market at this stage, but overall the weekly chart appears as a bearish continuation pattern with a poor moving average. Below 1.1916-1.1856 would significantly open the downside.
Wild Card
GBP/CHF
This forex pair's indicators are bullish and next resistance level is at 2.4215, a break above will hike prices to 2.4270. 4 hour momentum is at 100.01 slow stochastic at 80 and are supporting the bullish direction for today's trading session.
Market Trend
| EUR/USD | GBP/USD | USD/JPY | USD/CHF | AUD/USD | EUR/GBP | |
|---|---|---|---|---|---|---|
| Daily Trend |  |
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| Weekly Trend | |
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| Resistance | 1.3700 | 2.0130 | 119.35 | 1.2135 | 0.8420 | 0.6850 |
| 1.3675 | 2.0095 | 119.05 | 1.2105 | 0.8395 | 0.6830 | |
| 1.3636 | 2.0075 | 118.90 | 1.2071 | 0.8365 | 0.6810 | |
| Support | 1.3602 | 1.9990 | 118.45 | 1.2035 | 0.8310 | 0.6770 |
| 1.3585 | 1.9970 | 118.20 | 1.2020 | 0.8280 | 0.6755 | |
| 1.3560 | 1.9955 | 117.85 | 1.1985 | 0.8250 | 0.6725 |
Indicators
| Date | Time GMT | $€£¥ | Event | Period | Prev. | Forecast | Imp |
|---|---|---|---|---|---|---|---|
| 04/20/07 | 09:30 | GBP | U.K. Retail sales | m/m | 1.40% | 0.50% |  |
| 04/20/07 | 09:30 | GBP | U.K. Retail sales | y/y | 4.90% | 4.70% | |
| 04/20/07 | 17:00 | USD | Treasury Secretary Paulson Speaks |  | |||
| 04/20/07 | 17:15 | USD | Fed Governor Mishkin Speaks |  |