Summary: The Dollar Index fell to one-month lows at 98.004 (98.286) as a weak Retail Sales report in September added to growing fears of a slowing US economy. Retail Sales dropped 0.3% in September, the first fall in seven months, missing forecasts of a 0.3% rise. The benchmark US 10-year bond yield closed 3 basis points lower to 1.74% in late New York. Across the Atlantic, Brexit neared its endgame, with EU and British officials on the verge of a last-minute deal. Sterling extended its gains, climbing to 1.28776 before easing to end at 1.2525 for a gain of 0.48%. British PM Boris Johnson still has work to do back in the UK to ensure Parliament approves the plan. The Euro advanced to 1.1075, up 0.36% on the combination of an overall weaker US Dollar and Brexit optimism. USD/JPY ended little-changed at 108.75. Ahead of today’s crucial Employment report, the Australian Dollar traded marginally higher to 0.6762 (0.6755).
Wall Street stocks declined at the finish. The DOW was 0.22% lower to 26,972 (27,027). The S&P 500 lost 0.14% to 2,992 from 2,998 yesterday.
US September Core Retail Sales (excluding automobiles) fell 0.1% against forecast of a 0.2% gain.
UK September Annual Headline CPI missed forecasts at 1.7% (1.8%), while Core CPI matched expectations at 1.7%. UK September PPI Input (monthly) fell 0.8% lower than August’s fall of 0.1%.
- USD/DXY – The Dollar Index retreated to fresh one-month lows, hovering at the 98.00 level at the close. Weak US retail sales, which saw a big miss against forecasts and recorded its first fall in 7 months weighed on the Greenback.
- GBP/USD – Brexit related headlines once again dominated the FX landscape. Hopes continued to rise for a final deal as negotiations continued. The Pound traded in similar volatile fashion, jumping to a high at 1.28776 before dropping to 1.2825, up 0.48% from 1.2787 yesterday.
- AUD/USD The Aussie Dollar managed a marginal gain of 0.11% to 0.6762 (0.6752) ahead of today’s Australian Employment report. Median market forecasts are for a gain of 15,000 jobs in September from August’s 34,700. The Aussie Battler was sold down to 0.67236 on the market’s dovish interpretation of the latest RBA meeting minutes.
- EUR/USD – The Euro continued to advance buoyed by hopes of a Brexit deal and an overall weaker US Dollar. EUR/USD traded to 1.10855, fresh 4-week highs before easing to 1.1075 at the close, up 0.36%.
On the Lookout: Today’s data releases and events will set the tone for the next move in the Greenback. Before the release of today’s data RBA Deputy Governor Guy Debelle speaks at an Australian Investment Conference in Sydney. Bank of England Governor Mark Carney speaks at a Harvard University function in Boston. The European Council is expected to discuss Brexit at a meeting in Brussels today.
Australia’s September Employment Change, Unemployment Rate (forecast at 5.3%, unchanged from August), Participation Rate are released at 11.30 am Sydney time. Look for the breakdown as well between Full-time and Part-time Employment. European reports start with Swiss and Italian Trade Balances. The UK reports on its September Retail Sales. The US follows with a plethora of reports:
US Philadelphia Fed Manufacturing, Building Permits, Housing Starts, Industrial Production, Capacity Utilisation and Weekly Jobless Claims. Further slowing of the US economy could see more Dollar falls.
Markets will continue to monitor developments in trade and Brexit through various media releases.
Trading Perspective: The Dollar Index (USD/DXY) closed at a strong technical support at 98.00 after dipping briefly to 97.898. Expect some consolidation for the US Dollar against it’s Rivals although further confirmation of a slowing US economy will push the Greenback lower.
- USD/DXY – The Dollar Index traded to an overnight low at 97.898, climbing to 98.004 at the close, clinging to the 98.00 support level. The next support level lies at 97.80 followed by 97.50. Immediate resistance can be found at 98.30 and 98.50. Expect the Dollar Index to consolidate today with a likely range of 97.90-98.40. Prefer to sell rallies.
- EUR/USD – The Euro is still the main driver of the Dollar Index with 57.6% of the weight in the Index. Together with Sterling, the two currencies have a combined weight of 69.5% in the Index. The Euro traded to an overnight and 4-week high at 1.10855. Immediate resistance lies at 1.1085 followed by 1.1105. Immediate support can be found at 1.10520 and 1.1030. The EU Council meeting in Brussels on Brexit today is the big event for both the Euro and Pound. Look to trade a likely range today of 1.1040-1.1090. Just trade the range for this puppy today but the preference is to buy dips.
- GBP/USD – Sterling jumped quickly to 1.28776 as Brexit entered its endgame with officials from the EU and the UK on the verge of a deal. However, it dropped just as fast as it rose to finish at 1.2825. The main positive for the Pound is that expectations for a no-Brexit have faded. Any new deal would have to go through the UK’s fractious Parliament. Look for more volatility on the currency. Immediate support for today lies at 1.2780 followed by 1.2730. Immediate resistance can be found at 1.2850 followed by 1.2880. Look to trade a likely range today of 1.2780-1.2880. Prefer to sell rallies from current levels. But be nimble.
- AUD/USD – The Aussie Dollar was marginally higher at the NY close to 0.6762. Just a few minutes ago, RBA Assistant Governor Guy Debelle, speaking at an Australian Investment Conference in Sydney said that rate cuts have taken account of the expected downturn in housing. The Aussie stayed put at around 0.6760 following his speech. It all depends on the Aussie Jobs report in a little over an hour. Immediate resistance lies at 0.6780 followed by 0.6810. Immediate support can be found at 0.6745 and 0.6725. Look to trade a likely range today of 0.6745-0.6795. Prefer to buy dips. The Aussie speculative market is short, and the Battler needs to play catch up with the overall weaker Greenback.
Happy Thursday and trading all.