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FOREX: Greenback Firms on Above Consensus Retail Sales, Antipodeans Lag

FOREX
  • The USD index gained some moderate ground on Tuesday following above-expectation US retail sales figures in June. While the DXY remains 0.15% higher approaching the APAC crossover, we are off best levels as most major pairs slowly retrace the post-data reaction.
  • Underperforming on the session has been both AUD and NZD, falling over half a percent with the softer Chinese data on Monday still potentially weighing at the margin.
  • AUDUSD notably traded back down to test the prior breakout level around 0.6715, a level that closely matches with initial firm support at 0.6708, the 20-day EMA. Overall, bullish conditions remain intact for the pair and the latest pullback appears to be a correction.
  • In similar vein, NZDUSD trades half a percent lower and is now below 0.6050. Overnight NZDUSD straddle pricing points to a 35 pip breakeven which incorporates the second quarter CPI print scheduled Wednesday, potentially pointing to 0.6000 marking strong support for the pair. We pointed out yesterday that some desks have noted RBNZ cut expectations seem to be relatively stretched at this point, potentially setting a high bar for tomorrow’s data to confirm the market’s bias.
  • USDJPY has exhibited an 86 point range and trades close to 158.50 at typing. The Japanese Yen has remained in the spotlight following last week’s US inflation data and subsequent intervention from the BOJ. Latest reports suggest that the Japanese government intervened to the tune of Y5.6trl across two phases last Thursday and Friday, in what appears to be a more tactical approach to strengthen the currency.
  • Focus turns to inflation data for both New Zealand and the UK on Wednesday. US building permits and industrial production is also scheduled.
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