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EURUSD Sinks Towards 2019 Lows as US Dollar Soars on Retail Sales

Asia Pacific Market Open Talking Points

  • US Dollar soars on retail sales and industrial production
  • EURUSD sinks through support, eyeing new 2019 low?
  • Stocks may consolidate ahead of Fed, NZDUSD may fall

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The US Dollar soared against its major counterparts on Friday, topping off its best week since early March. Gains initially picked up during Friday’s Asia Pacific trading session amidst rising dovish RBA and RBNZ monetary policy bets, sinking AUDUSD and NZDUSD respectively. Then, the Greenback picked up rather dramatically after local data softened dovish Fed monetary policy expectations.

US retail sales and industrial production outperformed relative to economists’ expectations. In addition, there were significant upside revisions in April’s statistics. Overall, front-end government bond yields rallied and the S&P 500 declined. Disappointing University of Michigan sentiment was brushed aside and the anti-risk Japanese Yen gained against most of its major peers.

The Euro was also battered, sunk earlier in the day by a slew of disappointing Italian industrial sales and orders data. The nation is facing pressure from Rome’s budgetary ambitions which could lead to an excessive deficit procedure. Both German and Italian front-end government bond yields ended Friday to the downside.

EURUSD Technical Analysis

Looking at the EURUSD daily chart, the pair clocked in its worst performance in a single day (about 0.6%) since late March. The pair did clear near-term support at 1.1262, exposing and paving the oath for eventually retesting the May and June lows form 2017. That is a psychological barrier between 1.1109 and 1.1132. This also follows what appeared to be a false upside breakout through a descending channel of resistance (pink lines below).

EURUSD Daily Chart

EURUSD Sinks Towards 2019 Lows as US Dollar Soars on Retail Sales

*Charts Created in TradingView

Asia Pacific Monday Session

For a rather eventful week, Monday’s Asia Pacific trading session is relatively tamer. This places the focus on risk trends. S&P 500 futures were pointing a little lower at the end of last week, though not aggressively. Given the importance of the Fed this week, there may be some consolidation to be had in equities as investors hesitate to commit to a direction until the event has passed.

The New Zealand Dollar could be vulnerable to upcoming the local performance of services index, especially after last week’s dismal domestic manufacturing PMI outcome. A disappointing result may further boost dovish RBNZ monetary policy expectations. Meanwhile, IG Client Positioning is offering a bearish-contrarian NZDUSD trading bias. This poses as a downside risk for the pair.

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— Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

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