The US Dollar was slightly weakened against major currencies yesterday following soft retail sales data and worsening job claims are expected to give the Fed additional reason to remain dovish. However, US Dollar outlook remains strong as current geopolitical conflicts are not being thought of as particularly disrupting by the market.

The US Dollar was slightly weakened against major currencies yesterday following soft retail sales data and worsening job claims are expected to give the Fed additional reason to remain dovish. However, US Dollar outlook remains strong as current geopolitical conflicts are not being thought of as particularly disrupting by the market.

 

Soft Retail, Worse Unemployment

On Wednesday (15/8), US retail sales was down from 0.2% to zero, and core retail sales dropped from 0.4% to 0.1%. Initial jobless claims in the following Thursday noted highest claims since June on 311k, rose from 290k in the first week of August. The data that measures new and emerging unemployment were expected to rise to 'mere' 295k.

USUS Initial Jobless Claims rose in the second week of August

The string of weak data is seen as another reason for the Fed not to rush into rate hike following the end of QE tapering around October. Back in her July congressional testimony, the Fed Chief Janet Yellen has inferred that rate hike depends on US labor market improvement. But although the economy is still struggling, US outlook is still considerably stronger than the Eurozone and Japan that has released disappointing data earlier this week. Consequently, the USD quickly gained its losses, closed unchanged against Euro and ended a little higher against the Yen.

In addition to the aforementioned fundamental, risk force against the USD seemed to have somewhat lessened. CNBC cited analysts from Goldman Sachs pointed out that investors are showing little reaction to the events in Ukraine and the Middle East, taking their cue from a Federal Reserve unlikely to show much concern despite the seriousness of both trouble spots. The current scale of the the conflicts are not expected to inflict great impact on US defense spending or Oil prices.  Furthermore, in terms of each conflict's impact to the world economy, the now cooled down US-Russia sanction-counter sanction has higher degree of influence than battles in Iraq, Syria, and Gaza.

 

USDJPY Up, EURUSD Down

Along with lessening risk on the market, the safe haven Yen has moved higher. USDJPY on H4 has officially on the uptrend after EMA-20 line crossed EMA-60 line on its way upward consolidated price movement above EMA-200. Now we fully expect it to break 23.6 fibonacci toward 103.00.

USDJPYUSDJPY On TF H4 with EMA-20 (red), EMA-60 (blue), EMA-200 (magenta), and Fibonacci Retracement

If you are going to trade the USDJPY near market closing this week, watch out for US PPI release and Michigan consumer survey result. The first is a three-star fundamental that is estimated to drop from 0.4% to 0.1%, while the second is a moderate impact index that is estimated to rise slightly from 81.8 to 82.5.

Meanwhile, EURUSD suffered heavier downward pressure this week, mainly due to German economic downturn as the brunt of Ukraine conflict weighed on the Eurozone economy. Following the fall of German ZEW index, CPI remain stagnant on 0.4%, and preliminary Q2 GDP tumbled from 0.2% to 0.0%. Individually, data from German and France are also in decline.

EURUSDEURUSD in TF H1 with EMA-20 (red), EMA-60 (blue), EMA-200 (magenta), and Fibonacci Retracement

EURUSD in H1 shows price moves below EMA-200. An EMA-20/EMA-60 crossover yesterday signalled the high possibility of prices to move further down beyond Fibonacci 23.6 toward support level 1.3335. However, we don't think that price will actually touch that vital support again today as fundamental calendar is unoccupied by high level fundamental economy publication.