EU Session Bullet Report – USD Sell-Off After Weak Retail Sales

Economic data released yesterday in the US confirmed that the slowdown in the economy is larger than expected. US retail sales failed to meet expectations of a 0.2% m/m growth and settled for 0.1%.

Markets have now priced the expectation of a Fed rate hike in the coming months at the following levels:
October: 6%
December: 30.4%
January: 38.8%
Mar: 52.3%

The EUR/USD extended its winning streak into a 6th day, hovering near a two month high at 1.1485. However, this might change if EU stocks rise as their Asian counterparts did. Higher commodity prices (GOLD) and Australian jobs data boosted the sentiment over in Asia with Japan and China rebounding today.

Gold rose over $20 yesterday on the back of Expectations for a delay of a rate hike nearly breaking the important resistance of $1190. The improving risk appetite in Asia halted the rally so far below that level.

GBP/USD rose almost to 1.5500 as UK unemployment rate dropped to 5.4% in August, the lowest rate since the financial crisis in 2008, and giving investors’ confidence as to the domestic market outlook.

Looking ahead, main focus will be in US data today. Initial jobless claims are expected to rise to 269k in the week ended October 10. CPI is expected to turn negative to -0.2% yoy in September while core CPI is expected to be unchanged at 1.8% yoy. Empire Stat manufacturing index and Philly Fed survey will also be featured.

Trading quote of the day:

“The opportunity of a lifetime must be seized during the lifetime of the opportunity.”

-Leonard Ravenhill

EUR/USD
Pivot: 1.1405
Likely scenario: Long positions above 1.1405 with targets @ 1.1515 & 1.156 in extension.
Alternative scenario: Below 1.1405 look for further downside with 1.1375 & 1.1345 as targets.
Comment: The RSI is mixed to bullish.

GBP/USD
Pivot: 1.538
Likely scenario: Long positions above 1.538 with targets @ 1.553 & 1.5565 in extension.
Alternative scenario: Below 1.538 look for further downside with 1.5325 & 1.529 as targets.
Comment: Even though a continuation of the consolidation cannot be ruled out, its extent should be limited.