Forex Today: Dollar on fire, but wait, euro strikes back

Here is what you need to know on Friday 17 September in forex:

The US dollar was on a tear on Thursday in a bid that started in Asia and gathered momentum throughout the European session and the early morning of the US shift. 

The greenback rallied to the highest level in nearly three weeks as measured against a basket of currencies in the DXY index. Data showed US Retail Sales unexpectedly increased in August, easing some concerns about a sharp slowdown in economic growth. The DXY index added to gains following the report and was last up 0.42% at 92.863 by the closing bell on Wall Street. It hit its highest level since Aug 27 at 92.964.

Retail Sales rose 0.7% last month, boosted in part by back-to-school shopping and child tax credit payments, while data for July was revised down. Sales excluding gas and automotives lifted 2.0%. A separate report showed US Initial Claims for state unemployment benefits increased 20,000 to a seasonally adjusted 332,000 for the week ended Sept. 11. Economists had forecast 330,000 applications for the latest week. In other data, the Philadelphia Fed Manufacturing Index lifted to 30.7 (from 19.4) in September mirroring a similar result from the US Empire state manufacturing index. Eyes will now look to tomorrow Consumer Confidence after last month's shocker that reported at the height of COVID infections. The report has the potential to either make or break the US dollar had of next week's FOMC meeting. 

EUR/USD spikes in mid-US session 

Meanwhile, the euro got a mid-day boost on Wall Street when hawkish news circulated surrounding an unpublished ECB inflation estimate that raises the prospect of an earlier rate rise.  EUR/USD rallied around 20 pips on the news which out a floor in the downtrend on Thursday. EUR/USD had otherwise been falling from a high of 1.1820 to a low of 1.1750. 

Commodity currencies on the backfoot

In other standout currency performances, the kiwi gave back its second-quarter Gross Domestic Demand gains. NZD/USD fell from a 0.7139 high to a 0.7059 low. The correction is losing momentum at the hourly 38.2% Fibonacci retracement level near 0.7080, so there could be more downside to come for the sessions ahead. AUD/USD differed a similar fate after the prior day's disappointment in the Employment data.

AUD/USD fell from a high of 0.7347 to a low of 0.7247 and is on the same technical path as the kiwi currently. 0.7290 could be a significant level if broken to the downside for Friday's trade with the 0.7260s eyed. USD/CAD was bid, rallying to test commitments of the bears at 1.27 the figure which held as a familiar level of resistance.

The loonie was pressured from both sides as domestic data disappointed the market. The pound was also pressured despite the sentiment turning more hawkish around the Bank of England following the prior day's inflation report. Consumer prices in Britain rose by 3.2% in annual terms last month, the biggest monthly jump in the annual rate in at least 24 years. Cable fell over 0.5% to a one-week low of $1.3764. 

In equities, the S&P 500 was down 0.15% and the Dow Jones ended down 0.18%. In Europe, the Euro Stoxx 50 lifted 0.6% with more investor appetite for European stocks. The FTSE 100 lifted 0.2%. The US 10-year was 3.6bps higher at 1.334%.

In commodities, oil prices were softer despite the threat to production in the Gulf of Mexico from Hurricane Nicholas. WTI lifted 0.1% to USD75.55/bbl by the close. Gold fell out of bed by over $50, way further than the daily ATR of $22.  The yellow metal lows 2.24% by the closing bell on Wall Street and fell from $1,796 to a monthly low of $1,745.35. 

There is little to note in terms of calendar events for Asia Friday, but the European and US session could be interesting with UK Retail Sales, Eurozone Consumer Price Index and US Consumer Sentiment.