US Retail Sales can breathe new life on the Dollar but the bias is negative

Mixed performances has been the theme of the week for the major instruments we monitor every day and this was the case yesterday as well. In a day where the focus was on the Pound and the BoE comments after their rate decision the currency markets remained within their trading ranges as it is now clear that traders’ attention is on the Retail Sales report today.

The US Dollar had been under pressure during the earlier sessions of the year and that allowed the likes of the Euro, the Pound and other major currencies to gain against the US currency. Investors started doubting whether the Fed will be in a position to further hike rates in the first quarter or even half of the year based on fresh data coming from the US economy. That took its toll on the Dollar can the outlook is now mixed.

There is still time for the US Dollar to start the year strong and regain its lost ground against its peers, especially the Euro that has seen a good recovery since the previous lows of 1.0500. Today’s Retail Sales report will be a good opportunity for that but unfortunately for the Dollar analysts are bearish towards today’s report. Even though the labor market is expanding nicely the lack of any wage growth could be reflected on the buying habits of the Americans and that would put Dollar’s outlook back under doubt.

Taking a quick look at the price action of the last 24 hours, the Euro was again unstable and after trying to remain afloat above the 1.0900 level a reversal of the flows dragged it towards the 1.0850 level. However that was not the end of the day as overnight the Euro ticked higher back towards the 1.0900 area showing that there is a complete lack of direction at this time and traders need fresh concrete data to make up their mind. A rally higher would be targeting the 1.1000 level of resistance will to the downside the first area of focus lies at 1.0800.

The Cable was unexpectedly quiet yesterday and didn’t respond to the BoE rate decision meeting at all, the currency remained trading around the 1.4400 level and a couple of spikes to the upside did nothing to change the price action in the currency. The question now is whether the momentum to the downside has been exhausted and the Cable is in for a reversal, which of course hinges on the Retail Sales figures. The levels of focus are the 1.4500 resistance to the upside and the 1.4300 support area further lower.