Cable nears 1.40 ahead of retail sales data, US uncertainties loom

The US dollar remains offered. Although the Republicans passed the stopgap bill to prevent a government shutdown to February 16, the Senate may not be easy to convince. In fact, the Senate Democrats told that they have got sufficient votes to block the measures, they would like to negotiate a better deal for young immigrants. There are also talks that another alternative would be to agree on a shorter stopgap, to avoid the US government from shutting down at midnight on Friday if no agreement is sealed. As a result, the US dollar remains unloved against the majority of the G10 currencies. Of course, good news could give the greenback a boost before the end of the trading week. Therefore, the USD-risks remain two-sided into the weekly closing bell. The US 10-year yield hit 2.63%, the highest in a year.

In Germany, the political picture is quite as bad, but the euro remains strong. Germany's political stability is threatened by Sunday's vote on Chancellor Angela Merkel's coalition talks. ‘When 600 delegates vote Sunday on a proposal by party leaders to start formal coalition talks with the chancellor's bloc, they'll also be deciding whether Germany heads back to stability or lurches toward a repeat election that risks being as inconclusive as last year's' according to Bloomberg news. Although the German political turmoil is not a threat to the European integrity nor to the single currency, the euro traders could feel the pinch of political uncertainties in the Eurozone's leading economy in the coming weeks. Although there is no sign of panic in the euro markets for now, the euro's struggle to consolidate above the 1.23 level hints that a correction may soon be on the cards. The key supports stand at 1.2092 (December resistance turn into support) and 1.2012, the 38.2% retracement on the November – January rise.

Across the Channel, the UK's retail sales data is due today and the expectations are weak. A soft read could dampen the current positive mood, as Cable approaches the 1.40 resistance. The pound advanced to 1.3924 against the US dollar despite the slight downtick in December inflation released this week. Some traders believe that it could be time to enter in a tactical short position amid the RSI (78%) points at an overbought market and this situation could hold the pound-bulls back from a successful attempt above the psychological 1.40-resistance. Though, the mid-term traders will likely be seeking dip-buying opportunities despite the Brexit uncertainties, as 2018 could be the year of recovery for the currency and the pound has made a solid start to the year.

Elsewhere, the weekly EIA report showed that the US crude inventories dropped by the most in record (-6.9 million barrels) last week. WTI crude made a short attempt above $64 on Thursday, yet failed to clear offers above this level, which has been an invitation to the bears to jump in the market. The price of WTI crude broke below the 200-hour moving average ($63.42) in Asia and the sell-off could stretch to $62.70 and $61.40 (minor 23.6% and major 38.2% retracement on December – January rise.