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All Eyes on US Retail Sales as EUR/USD Corrects Overnight

Last updated 4/14/2009 5:05 AM ET (GMT -5) 0 Comments - Add your comment

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Boris Schlossberg

Director of Currency Research, GFT

Top Stories

• Goldman reports better earnings announces $5 Billion offering
• Shanghai copper futures down 5% daily limit
• Equities mixed with Nikkei down but Europe up
• Oil below $50/bbl at $49.22 last
• Gold close to $900 at $897/oz

Overnight Eco

• NZD Retail Sales 0.2% vs. -0.5% forecast
• AUD NAB Business Confidence -13 vs. -42

Event Risk on Tap

• USD Retail Sales expected at 0.3%
• USD PPI expected at 0.0%
• USD Business Inventories expected at -1.2%

Price Action

• USD/JPY sells down to 99.40 on risk aversion but stabilizes at 99.70 in early Europe
• AUD/USD profit taking pushes Aussie to 7250 despite better NAB data
• GBP/USD remains strong above 1.4800
• EUR/USD falls through 1.3300 on profit taking and concerns over further EZ weakness

A relatively quiet night of trade in the currency markets punctuated by some profit taking in high beta currencies after the euro, the pound and the Aussie all rallied strongly yesterday as risk appetite continued to dominate trade. Today the mood has been t more somber with US equity futures pointing to a lower open despite the fact that Goldman Sachs reported better than expected results yesterday after the close of US equity session.

Goldman Raising $5bn is Wrong

With Europe just returning from the long Easter holiday break, the economic calendar remains light with only Asian Pacific data on the docket. In New Zealand Retails Sales for February printed much better than expected at  0.2% vs. -0.5% forecast while in Australia the NAB business confidence survey came in at -13 versus -42 the month prior.

As we noted earlier, “The better than forecast results indicate that the two commodity driven economies are experiencing far shallower recessions than the rest of the G-10 universe as Chinese demand for basic materials remains healthy. China massive stimulus program worth about 8% of the GDP is geared towards infrastructure spending which in turn is proving positive for both Australia and New Zealand. The two pairs could be vulnerable to a sell off should risk aversion return, but if Q1 of 2009 proves to be the bottom of the current recession and global demand begins to pick up, the Aussie and kiwi will remain one of the better ways to play the turn.”

In North American session today the US Retail Sales numbers for March will no doubt be the marquee event on the calendar.  Consensus call is for a 0.3% increase from the month prior but ex-autos the market expects -0.1% decline. Should Retail Sales surprise to the upside the report could serve as a strong support for the bullish argument that a rebound is in the works and could extend  the rally in equities and in the high beta currencies. 

On the other hand a dour number could trigger a wave of liquidation as both equity and currency traders take profits. Should the risk rally continue the EUR/USD could make a run at 1.3400 and pound could target 1.5000 as the day progresses, but having risen significantly already the pairs face the danger of a sharp sell off should Retail Sales show no improvement in consumer demand..     

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About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.