S & P 500
The Dollar Index
The Retail Sales figure in June was robust, rising by 0.6% from 0.2% in the previous month, beating the expectation of 0.1%, has seen the third straight positive figure. YoY Retail Sales increased by 2.7%. The Core Retail Sales in June, excluding automobile and gasoline, rising by 0.7% from 0.4% in the previous month.
The National Retail Federation (NRF) reported an adjustment to their 2016 annual retail sales forecast, to 3.4% from 3.1%, in the end of July. Online sales are expected to grow 7-10% compared to the original estimate of 6-9%. The reason for the upgrade, resulted from the growth of labour and property markets, also the rise of consumer confidence.
The S & P 500 and Dow Jones indices both hit new record highs at 2187.92 and 18637 points respectively, on Thursday 11th Aug, lifted by the department store Macy’s strong quarterly sales and the rebound in the price of oil. Strong retail earnings bolstered market sentiment.
The S & P 500 index has been moving upwards in a moderate pace since 14th July. Keep an eye on the US Retail Sales (MoM), the Core Retail Sales (MoM), and the PPI figures(MoM), released on Friday 12th Aug. Positive readings will likely push the S&P up, testing the upside trend line resistance at 2189. Alternatively, negative figures will likely drive the index down and test the support line at 2177, followed by 2175 and 2170. On a 4 hourly time frame, the KD indicator is above 80, suggesting a pullback.
The dollar index future has pulled back since 9th August, due to three reasons: the profit-taking pressure after Nonfarm Payrolls pushed the price up, the market’s lowered expectation for a Fed rate hike as economic data gave mixed signals, and technically the KD indicator was at a high level, indicating a retracement. It has rebounded since 10th Aug, yet the level at 95.90 is a significant resistance level. The 4 hourly time frame KD indicator suggests a pullback.
AUDUSD has reached a three-month high of 0.7759 on 11th Aug, surpassing the price level before the May rate cut. The Aussie has outperformed among currencies this week, resulting from: the market’s risk-on sentiment, the firmness of iron ore price, the weakening of the USD, and the rally of NZDUSD.
The bullish trend is still ongoing, yet the price zone is near the resistance zone between 0.776 to 0.783 and the upside selling pressure is increasing. Be aware at this price zone, if the resistance at 0.776 is confirmed broken, the next target is the previous high level in April at 0.783.
Downside support is at 0.7658 followed by 0.7624 and 0.759.
USDJPY has pulled back since 21st July for three reasons. Firstly, the weakening of the dollar. Secondly, Japan’s core private-sector machinery orders rose by 8.3% in June, beating expectations of 3.1%. The figure is regarded as a leading indicator of corporate capital expenditure and economic expansion. Thirdly, the modest stimulus measures implemented by the Bank of Japan have tempered further yen weakness.
In terms of the daily time frame, the price held after testing the significant support line at 101.00 on six occasions, since 2nd Aug. The price between 101.00 to 100.00 is a strong support zone.
Keep an eye on the Retail Sales, Core Retail Sales, and PPI in the US, due to be released at 13:30 GMT+1 on Friday 12th Aug. Positive readings will likely push the dollar up, USDJPY will likely rebound. Alternatively, negative figures will likely drive the dollar further down, the support level at 101 will likely be tested again.