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At 8:30:00 AM US June Retail Sales (exp 0.7%, prev -0.9%) US June Retail Sales Ex autos (exp 0.5%, prev -0.4%) At 9:45:00 AM US July Univ of Michigan Sentiment Survey (exp 92.8, prev 92.4)
The dollar remained firm in London trade despite an early attempt to push it lower as dealers await key data from the US today. June retail sales is expected to bounce back 0.7% after falling 0.9% previously while consumer confidence from the Univ Mich survey is also expected to rise to 92.8 in July from 92.4, possibly giving reason to traders to postpone further dollar selling. US equity futures are also in the green making the case for a possible correction higher in the dollar today especially after the upward revision to Dell's earnings lifted bourses across the board today.
EUR/USD was unable to break resistance at 99.10/20 today as it eased off an earlier high of 99.08 in early London trade. Another failed attempt for the euro to break higher against the dollar has increased the chance of an additional leg down in EUR/USD before attempting to break parity. Support is seen at 98.40, which marks the 50% retracement of the 97.10 to 99.65 rally, followed by 98.10, the 62% retracement of the same move. A break below this level could test 97.65 but should hold above trendline support at 97.40 before resuming its uptrend. But direction in the dollar will continue to take its cue from the US equity market, which remains volatile and could continue to decline if we do not see another bear market bounce. Resistance is seen at 99.10/20, 99.40, 99.70, 99.90.
GBP/USD also eased back from an overnight high of 1.5575, falling one cent to support at 1.5475, which marks the 62% retracement of the 1.5415 to 1.5575 rally this week. A move below this level would call upon support seen at 1.5450 and 1.5410.
USD/CHF continues to consolidate around 1.4850 with support at 1.48 and 1.4780 seen holding up the pair. Resistance is seen at 1.4925 and a break higher could target 1.4960 ahead of 1.50. But any correction higher should be contained by last Friday's high of 1.5080.
Meanwhile, USD/JPY held above an overnight 10-month low of 116.50 as mostly intervention fears and an overnight rally in the Nasdaq helped the dollar from falling through its September low of 115.75. However, resistance at the 200-week average of 116.90 has capped gains today with further resistance eyed at 117.20, 117.40 and 118.00/10. A break below 116.50 would likely put the Bank of Japan on high alert today. The last time the Bank of Japan stepped in to cap the yen was on Friday June 28, immediately after the release of dollar-boosting Chicago PMI, which facilitated the Bank in its operations to buy the dollar for yen and could precipitate intervention today.
A senior government official said today that the yen's rise against the dollar has so far had a limited effect on the economy. However, the market is still aware that the currency plays a key role in any export-led recovery in Japan and that at some point in the very near term yen strength may become uncomfortable.
Earlier comments from FinMin Shiokawa also confused the markets after he stated that the dollar's decline against the yen seemed to be getting less rapid than 2-weeks earlier. But the Finance Minister also said that Japan would act against excessive volatility in the currency market. Some traders interpreted the FinMin's comments to mean that BoJ intervention is not imminent, while others took his comments to mean the Bank of Japan could step in at any time. Meanwhile, other MoF officials were more consistent and clear with their rhetoric. MoF's Muto, Kuroda, and Mizoguchi all conveyed the same message -- no change in Japan's forex policy.