The US Dollar started the week on a defensive note and remained under the shadow of Friday's retail sales and inflation data miss. According to the data released from the US, monthly retail sales rose in April, while March sales were also revised higher, but was well short of consensus estimates. Meanwhile, headline inflation rebounded in April but the core reading was weaker than expected. Friday's slightly weaker US economic data had a little impact on June Fed rate-hike expectations, with CME group's FedWatch Tool still pointing to over 70% probability for such an action.
With a relatively quieter economic docket, featuring the only release of Empire State Manufacturing Index from the US, the broader market sentiment surrounding the greenback would remain an exclusive driver of the movement in the FX market on Monday.
Friday’s disappointing US economic data helped the pair to rebound from mid-1.2800s intermediate support. The pair built on Friday’s recovery move and has now moved back above the 1.2900 handle as focus shifts to this week’s important macroeconomic releases from the UK, including inflation figures and monthly employment report.
From a technical perspective, failure to break through the key 1.30 psychological mark, and a subsequent break through a short-term ascending trend-channel, seems to suggest that the pair might have topped out in the near-term. However, a decisive break below 1.2850-30 support area, coinciding with 23.6% Fibonacci retracement level of 1.2365-1.2990 recent up-move, is needed to confirm further near-term corrective slide towards the 1.2800 handle en-route 38.2% Fibonacci retracement level support near mid-1.2700s.
On the flip side, any further recovery move now seems to confront resistance near the ascending trend-channel support break-point near 1.2945-50 region. A sustained move above the said hurdle would negate expectations of any near-term corrective slide and the pair is likely to make a fresh attempt to conquer the 1.30 handle.
The pair has managed to rebound from the very important 200-day SMA support near 1.0840 region, also coinciding with 38.2% Fibonacci retracement level of 1.0570-1.1022. Investors now look forward to this week’s EU inflation data on Wednesday, as a strong reading is likely to resurface expectations of early ECB tapering and profit a fresh bullish impetus for the major.
Technically, the pair has moved back above 23.6% Fibonacci retracement level hurdle near 1.0900-1.0910 region and hence, seems poised to build on Friday’s recovery move. However, any further recovery is likely to confront some fresh supply near 1.0945-50 horizontal resistance, above which the pair is likely to aim towards reclaiming the key 1.1000 psychological mark before eventually darting towards its next important hurdle near 1.1055-60 area.
Conversely, retracement back below 1.0910-1.0900 resistance turned support area could drag the pair back towards 1.0840-30 confluence support, which if broken should accelerate the slide towards 50% Fibonacci retracement level support near 1.0800-1.0795 region. A follow through selling pressure might continue to drag the pair towards filling the French Presidential election bullish gap and test 61.8% Fibonacci retracement level support near 1.0740 region.
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