The US Dollar caught a bid overnight as both retail sales and unemployment claim data beat market expectations.
The consumer spending side of economic growth has long been viewed by markets as the last missing piece of the puzzle that the Fed needs to have in order to begin liftoff on raising interest rates. This puts the print in the highly market sensitive basket heading into FOMC next week.
Retail sales climbed 1.2% in May, beating the 1.1% expectation. Unemployment claims were steady at 279K v the expected 277K. Human beings like round numbers, and the fact that it is again below the 300K mark will have the steady number taken as a positive sign for economic growth.
So is the Fed in play next week? Markets are still saying September to December but I wouldn’t completely rule it out. We know that the Fed want to do do things gradually and this could be one way of starting the ball rolling. The data is there, now just push that big green button Janet!
On the Calendar Today:
Light on the Asian calendar to end the week but after the better than expected retail numbers last night, the USD could end the week with a bang if tonight’s PPI and Consumer Sentiment numbers also come in above expectation.
USD Core PPI
USD Prelim UoM Consumer Sentiment
Chart of the Day:
In yesterday’s Asian Session Morning blog post, I spoke about the USD/JPY move.
“We can see that price hasn’t yet troubled the previous support/resistance zone that we have marked on the charts and so long as we are above this level, it’s really just a healthy correction off the top.
If you buy into the fundamental story that Kuroda’s comments don’t have any strength behind them then this move is just weak longs getting blown out of the market before the real move higher again.”
Click on chart to see a larger view.
With a little bit of time for what Kuroda’s jawboning actually meant for markets, they decided that it actually wasn’t as important as first priced in. Helped by strong retail sales out of the US and a low liquidity spike to the upside last night, the drop was completely retraced.
If you can take a rational view to what was actually said, you usually don’t have to time your entry down to the second. As you can see from this long setup, markets are not always rational and you will get your entry if you are patient.
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