Soft US Inflation and Retail Sales Data Discourage USD-Bulls

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Soft US Inflation and Retail Sales Data Discourage USD-Bulls

Today, US data was the main culprit of the USD’s slide across the board. Let’s start with the data set, which includes producer price inflation and retail sales, and then observe some of the USD-crosses.

US Producer Price Index (PPI) m/m (March): 0.2%
Forecast: 0.3%
Previous: -0.5%
us ppi march
(click to enlarge; source: forexfactory.com)
Core Producer Price Index (PPI) m/m (Mar.): 0.2%
Forecast: 0.2%
Previous: -0.5%

US Retail Sales m/m (March): 0.9%
Forecast: 1.1%
Previous: -0.5% (revised from -0.6%)
us retail sales march
(click to enlarge; source: forexfactory.com)
Core Retail Sales m/m (Mar.): 0.4%
Forecast: 0.7%
Previous: 0.0% (revised up from -0.1%)

First of all, the headline PPI data was softer than forecast, but still was a recovery after straight months of negative prints. Retail sales has also been weak from the turn of the year to February, but saw a rebound in March, albeit not as strong as forecast.

The market has been becoming more cautious about buying the USD further because the soft data throughout the year so far means the Fed will have to delay its rate hike plan. We need another month of positive inflation and retail sales data before traders gain confidence. However, the data today should not take away the USD strength outside of the short-term because the FOMC is still seen as the first to raise rates (ever since the RBNZ has stopped its rate hike campaign).

We took a look at the EUR/USD and levels that traders might sell from: EUR/USD – Two Levels to Sell From.

Let’s take a look at the GBP/USD 4H Chart:
gbpusd 4h chart 4/14
(click to enlarge)

As we can see, cable rebounded after making a new low on the year around 1.4465. The current pullback should see resistance in the 1.48-1.4850 area, and the 4H RSI should stay under 60, forgiving a little intra-session breach. That is, if the GBP/USD is still bearish in the medium-term. Above 1.4850, it will be very unclear, but there would be some short-term risk to test the 1.4945-1.4995 resistance area.

USD/JPY 4H Chart 4/14
usdjpy 4h chart 4/14
(click to enlarge)

The USD/JPY has been trading in a choppy but slightly bullish channel. This is not indicative a bullish continuation. Nonetheless it shows a shift from the price action in March. Now, price fell today after the US data, and is now testing the rising trendline seen in the 4H chart. If the market can hold above 119, and come back above 120.25, the bullish outlook still remains in the short-term. A break below 119 however keeps USD/JPY neutral and possibly slightly bearish in the short-term. Otherwise, the pressure should remain bullish towards the 122 high on the year.

Previous Post by Author: EUR/USD – Two Levels to Sell From

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.