Sterling Shrugs Strong Retail Sales, Dollar Holding Above Near Term Support

Dollar and Yen traded with an undertone in Asian session today but Aussie is also mildly weaker. On the other hand, Swiss Franc is the stronger one, followed by Kiwi and Canadian. Sterling is treading water despite strong UK retail sales data. Swiss Franc is staying at the winner for the week, on talks that SNB is turning more open for rate hike. Sterling is a distant second. Dollar is the worst performing one, followed by Canadian and Yen.

Technically, a big question is on whether Dollar’s selloff could gather momentum before weekend to secure more selloff next week. Focuses will be on 1.0641 resistance in EUR/USD, 1.2627 resistance in GBP/USD, and 1.2712 support in USD/CAD. Also, if Gold could break through 1858.57 minor resistance, that could be a hint on Dollar weakness too.

In Asia, Nikkei closed up 1.28%. Hong Kong HSI is up 2.20%. China Shanghai SSE is up 1.26%. Singapore Strait Times is up 1.37%. Japan 10-year JGB yield is down -0.0026 at 0.240. Overnight, DOW dropped -0.75%. S&P 500 dropped -0.58%. NASDAQ dropped -0.26%. 10-year yield dropped -0.031 to 2.855.

UK retail sales rose 1.4% mom in Apr, ex-fuel sales up 1.4% mom

UK retail sales rose 1.4% mom in April, well above expectation of -0.2% mom decline. That’s also more than enough to recover the -1.2% mom decline in March. Ex-fuel sales also rose 1.4% mom, versus expectation of -0.2% mom, reversing the -0.9% mom decline in March.

However, for the most recent 3 months on previous 3 months, headline sales dropped -0.3% while ex-fuel sales dropped -0.5%.

From Germany, PPI came in at 2.8% mom, 33.5% yoy in April, above expectation of 1.4% mom, 31.4% yoy.

New Zealand export rose 17% yoy in Apr, imports rose 15% yoy

New Zealand goods exports rose 17% yoy to NZD 6.3B in April. Imports rose 15% yoy to NZD 5.7%B. Monthly trade surplus came in at NZD 584m, versus expectation of NZD -350m deficit.

Exports rose for all top destinations except China, which was down -1.8%. Exports to Australia was up 4.9%, US up 26%, EU up 26%, Japan up 58%.

Import from all top partners rose, including China (up 8.9%), EU (up 18%), Australia (up 44%), US (up 29%), Japan (up 0.5%).

Japan CPI core rose to 2.5% yoy in Apr, CPI core-core rose to 0.8% yoy

Japan headline CPI (all items) rose from 1.2% yoy to 2.5% yoy in April. CPI core (ex-fresh food) rose from 0.8% yoy to 2.1% yoy. CPI core-core (ex-fresh food, energy) rose from -0.7% yoy to 0.8% yoy.

The 2.1% CPI core reading was slightly above expectation of 2.0% yoy. It topped BoJ’s 2% target for the firs time since March 2015. Also, it should be noted that CPI core-core was positive for the first time since July 2020.

GBP/USD Daily Outlook

Daily Pivots: (S1) 1.2364; (P) 1.2445; (R1) 1.2551; More..

Intraday bias in GBP/USD remains neutral and outlook is unchanged. . Further decline will remain in favor as long as 1.2637 resistance holds. On the downside, break of 1.2154 will resume the down trend from 1.4248. However, considering bullish convergence condition in 4 hour MACD, break of 1.2637 will confirm short term bottoming at 1.2154. Intraday bias will be turned back to the upside for 55 day EMA (now at 1.2789).

In the bigger picture, based on current momentum, fall from 1.4248 (2018 high) at least at the same degree as the rise from 1.1409 (2020 low). That is, fall from 1.4248 could be a leg inside the pattern from 1.1409, or resuming the longer term down trend. In either case, deeper decline is expected as long as 1.2999 support turned resistance holds. Next target is 1.1409 low.

Economic Indicators Update