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Markets warp with strong USD and Sterling weakness following depressing retail sales. EUR/USD, GBP/USD, USD/JPY

Jan 17 2020, 08:26 PM (+06) |

Phase One of the trade agreement between the 2 leading world economies was signed on Wednesday. The markets reacted with cautious optimism. About 2/3 of the tariffs on Chinese import remain in place and will be considered as a part of the phase two negotiations, for which the date is not yet known. There is certainly an easing in tensions and a spur of optimism for manufacturers, however we must see how the trade agreement will be implemented. The European Union Trade Commissioner Phil Hogan said his team plans to examine the trade agreement in detail to see if it complies with the World Trade Organization and if they find any compliance issues, they plan to present the case for challenge with the WTO. 

The United States Dollar Index has been on a recovery since yesterday’s upbeat retail sales and initial jobless claims. Core retail sales MoM for Dec. were released at 0.7% ahead of 0.5% forecast and the previous result of 0.1%. Initial jobless claims were also reported better than the forecast at 204K, below 216K forecast. There’s also a huge recovery in Philadelphia manufacturing, the index was released at a whopping 17.0 ahead of the 3.8 forecast and previous 2.4. 

Several members of the European Central Bank have stated that they foresee economic stabilization in 2020. The monetary policy meeting minutes were released yesterday which stated that the low interest rates are to be left in place until inflation comes within range of the 2% target. Eurozone consumer price index was released today at a steady 1.3%, continuing the trend

Later today, we have the release on U.S. real estate with building permits and housing starts for December at 1:30pm GMT and JOLTs job openings for November at 3pm GMT. 

EUR/USD on a Daily TF is trading lower on USD strength. Currently the price is around 1.11121. We’ve readjusted our Fibonacci levels from the previous uptrend from November 29th 2019. The price met support at the 50% Fibo level which coincides with the 48EMA. The Parabolic SAR is pointing down and the MACD bearish histogram has increased. 

Resistance: R1 38.2% Fibo 1.11407, R2 23.6% Fibo 1.11784, R3 1.12.
Support: S1 1.11 (trend line), S2 61.8% Fibo 1.10798, S3 1.10575. 

The British pound is again under pressure after horrid retails sales. Recently several members of the Bank of England, including Mark Carney and Michael Saunders expressed the need for monetary easing to meet the necessary inflation target. The case for monetary easing is building with todays release, retail sales MoM for December were released at -0.6% instead of the 0.5% forecasted growth. 

GBP/USD on a Daily TF experienced an unexplained mini rally since Tuesday that dropped the price to our local trend line down and today’s release brought the pair back below the trend line and 13 EMA. The price is currently around 1.30340. The Parabolic Sar is pointing down, and the MACD is still bearish. 

Resistance: R1 50% Fibo 1.31675, R2 1.33327, R3 61.8% Fibo 1.34529.
Support: S1 48 EMA 1.30, S2 1.29500, S3 38.2% Fibo 1.28821. 

USD/JPY on a Daily TF is trading higher on USD strength. The price tried and failed to break resistance at 110.214, and is currently trading around 110.156. 

The 13 and 48 EMA are pointing up, the MACD bullish histogram is increasing, and the Parabolic Sar is pointing up as well. 

Resistance: R1 110.681, R2 111.069, R3 111.376.
Support: S1 109.900, S2 109.624, S3 109.362.

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