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Feb 17 - 04:55 PM

EUR/USD - COMMENT-US Recap: EUR/USD Tumbles After Strong Retail Sales Embolden Dollar

By Randolph Donney  —  Feb 17 - 02:48 PM

The dollar rallied broadly on Wednesday after surprisingly strong retail sales data nL1N2KM1PY bolstered the view of a robust U.S. recovery under way even before Congress delivers its next $1.9 trillion relief package.

EUR/USD tumbled to its lowest in 7 sessions, shifting focus to support at the 100-day moving average and cloud base, last at 1.1996/75 on EBS, which caught this year's fall on Feb.
4-5.
Meanwhile, the market registered a $21.24 bln net EUR/USD long at the IMM last week.

The dollar might have gained more were it not for the fact that 10-year Treasury yields had already stopped at major resistance nL1N2KN1JU.

Ten-year Treasury yields had added about 40bp from early January lows to Wednesday's 1.33% peak, which ran into 2016's pre-pandemic low, the influential 100-week moving average and the 61.8% Fibo of the October 2019 to March 2020 slide.

That sales were bolstered by December's fiscal stimulus and pandemic disrupted seasonals only partly diminished the bullishness of the report.

And with more stimulus on the way and inoculations on the cusp of coming to the highest earning and spending age groups, Treasury yields will eventually clear Wednesday's key resistance and reach pre-pandemic levels, further fueling dollar gains.

FOMC Minutes reaffirmed the Fed's well publicized willingness to look past an expected and transient rise in inflation in coming months nW1N2KG00A.

The rally in the dollar index nL1N2KN1EU was hampered somewhat by the overbought USD/JPY backing off its 106.225 measured objective.

USD/JPY's rally had been outpacing dollar gains against the other reserve currencies, leaving it with room to correct overbought daily studies.

After closing above the 200-day moving average -- now at 105.53 -- USD/JPY now finds support there.
But it also completed a measured move top on Wednesday by the upper 21-day Bolli, with bearish overbought divergence by daily RSIs, which warrants attention.
As does the lack of a close above the 38.2% Fibo of the pandemic downtrend at 106.08 despite piercing that hurdle intraday.

The broader reversal of the pandemic downtrend remains intact while above major support at 104.40-42 from the 100-DMA, February's low and the Jan.
11 swing high.

Sterling went with the flow of traffic, slipping further away from the touted 1.40 target.

The assumption for sterling is dips will be seen as buying opportunities due to the UK's accelerated vaccination programs and plans for reopening nL1N2KN1J3.

High-beta currencies breathed half a sigh of relief as Treasury yields consolidated recent large gains instead of soaring, while bitcoin forged a fresh record high with ethereum in hot pursuit.

Oil prices posted new post-pandemic highs amid weather-related supply constraints in Texas.

AUD/USD held just beneath this year's low ahead of Thursday's jobs report.

U.S.
weekly jobless claims and housing starts are Thursday's main attraction.

For more click on FXBUZ

Source:
Refinitiv IFR Research/Market Commentary

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