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Soft US Data and the Reactions in EUR/USD, GBP/USD, and USD/JPY

Today, US data was the main culprit of the USD’s slide across the board. Let’s start with the data set, which includes producer price inflation and retail sales, and then observe some of the USD-crosses.

US Producer Price Index (PPI) m/m (March): 0.2%
Forecast: 0.3%
Previous: -0.5%

(click to enlarge; source:
Core Producer Price Index (PPI) m/m (Mar.): 0.2%
Forecast: 0.2%
Previous: -0.5%

US Retail Sales m/m (March): 0.9%
Forecast: 1.1%
Previous: -0.5% (revised from -0.6%)

(click to enlarge; source:
Core Retail Sales m/m (Mar.): 0.4%
Forecast: 0.7%
Previous: 0.0% (revised up from -0.1%)

First of all, the headline PPI data was softer than forecast, but still was a recovery after straight months of negative prints. Retail sales has also been weak from the turn of the year to February, but saw a rebound in March, albeit not as strong as forecast.

The market has been becoming more cautious about buying the USD further because the soft data throughout the year so far means the Fed will have to delay its rate hike plan. We need another month of positive inflation and retail sales data before traders gain confidence. However, the data today should not take away the USD strength outside of the short-term because the FOMC is still seen as the first to raise rates (ever since the RBNZ has stopped its rate hike campaign).

The EUR/USD rebounded, but there are a couple of spots we should monitor for sellers:

Since falling to 1.0462 in March, EUR/USD has been consolidating. The resistance of this consolidation structure was in the 1.1040-1.1052 area.

EUR/USD 4H Chart 4/14

(click to enlarge)

After a third failed attempt to clear the consolidation resistance area, EUR/USD fell. The 4H chart shows the bearish breakout. Some see a break of an ascending triangle. Others see a broken double top. Here are some other observations from the 4H chart:
1) Price broke below the 200-, 100-, and 50-period simple moving averages, which reflects a return to the bearish trend, especially if price action tests the SMAs again as resistance.
2) The RSI dipped below 30, which reflects revival of bearish momentum. If it comes up but stays under 60, the bearish momentum would still be in play.

Other key notes:
1) The prevailing trend is bearish.
2) The ECB is dovish, and the FOMC is hawkish, even though it has become less so in 2015 due to disappointing data.

Given the aforementioned fundamental and technical notes, EUR/USD should still be bearish. The first place we can look for resistance is the 1.0713 level – previous support pivot. But given the strong bullish candle, let’s give it some elbow space to the cluster of moving averages around 1.08. IF the RSI stalls around 60 as well, we should anticipate another bearish attempt at least down towards the 1.0462 low.

If price extends higher, the next key resistance will once again be the 1.1040-1.1050 area. However, since the current low missed the 1.0462 low, we should expect some “clear-out” above 1.1052.

EUR/USD Daily Chart

(click to enlarge)

In the daily chart, we can see that the prevailing downtrend remains bearish and there is no reason to believe that will change at the moment. If price breaks above 1.1060 and starts to hold above 1.10 then we should consider a more significant bullish correction mode.

Otherwise, look for sellers at 1.08 then again around 1.1060 just above the current consolidation high.

Let’s take a look at the GBP/USD 4H Chart:

(click to enlarge)

As we can see, cable rebounded after making a new low on the year around 1.4465. The current pullback should see resistance in the 1.48-1.4850 area, and the 4H RSI should stay under 60, forgiving a little intra-session breach. That is, if the GBP/USD is still bearish in the medium-term. Above 1.4850, it will be very unclear, but there would be some short-term risk to test the 1.4945-1.4995 resistance area.

USD/JPY 4H Chart 4/14

(click to enlarge)

The USD/JPY has been trading in a choppy but slightly bullish channel. This is not indicative a bullish continuation. Nonetheless it shows a shift from the price action in March. Now, price fell today after the US data, and is now testing the rising trendline seen in the 4H chart. If the market can hold above 119, and come back above 120.25, the bullish outlook still remains in the short-term. A break below 119 however keeps USD/JPY neutral and possibly slightly bearish in the short-term. Otherwise, the pressure should remain bullish towards the 122 high on the year.