US Core Retail Sales data was released on Thursday, retail sales rose 0.7% last month, boosted by back-to-school shopping and child tax credit payments

17 September 2021, 04:30

Market Focus

US stock declined on Thursday after swinging between gains and losses. Expiration of options and futures will be on Friday, which usually results in high volume and volatility. After seven months of gains, the equity market became choppier midway through September, but some market strategists believe that this is actually quite normal from a historical, seasonal standpoint.

The benchmarks, S&P 500 and Dow Jones, both dropped on Thursday. S&P 500 was down 0.2% on a daily basis, as the index edged lower a day after it posted its biggest gain since August on Wednesday. The material and energy sectors were the worst performing among all groups, dropping 1.09% and 1.06%, respectively. The NASDAQ, on the contrary, finished in positive territory for a second day.

On top of that, US Core Retail Sales data was released on Thursday, retail sales rose 0.7% last month, boosted by back-to-school shopping and child tax credit payments. The data unexpectedly increased in August, easing some concerns about a sharp slowdown in economic growth. The news has bolstered investor expectations for next week’s policy meeting, as well as expectations that US central bank will start to taper stimulus sooner. However, the weekly jobless claims increased to 332K, higher than what the market had expected. Therefore, the market fluctuated as investors digested the impact of mixed economic data. Market focus has now shifted to next week’s FOMC meeting.

In Asia, the stock market was surrounded by selling pressure as the debt crisis in China Evergrande Group keeps fermenting. Furthermore, casino stocks in Macau extended their losses amid the government’s tightening regulations on casino firms.

Main Pairs Movement

The U.S. core retail sales figures for August was due earlier today, and the news quickly sent shockwaves across foreign exchange markets. August retail sales increase by 1.8%, month over month, excluding car sales. The robust August spending figures went against fears of the Delta variant hampering economic recovery, providing a much-needed boost of confidence in the U.S. economy. Majority consumer spending in August has shifted from the service industry to furniture, groceries, hardware, and online purchases.

Most currencies dropped against the dollar as demand for the Greenback soared. Cable trended lower and dropped through our previously estimated support level of 1.3801. USD/CAD gained as demand for the dollar soared, but the pair is still consolidating between 1.2589 and 1.268 with no clear down or up trend. AUD/USD, also, fell through our previously estimated support level of 0.731 as the dollar gained strength.

Technical Analysis

GBPUSD (4-hour Chart)

Cable traded higher during the European trading session as the U.K. cabinet reshuffle passed smoothly. However, as the robust U.S. retail figures and American trading hours arrived, the dollar gained strength and started to drag Cable down. Cable tumbled as much as 0.53% at the beginning of the American trading session. The strong dollar brought Cable beneath our previously estimated support level of 1.3801 and the pair is trading at 1.378 as of writing. Speculators will be eyeing next week’s FOMC meeting as FED bond tapering is seemingly imminent.

From a technical point, GBP/USD reversed yesterday’s upward trend amid a resurgence of dollar demand due to healthy August retail sales figures. Cable has broken through our previously estimated support level and is continuing to trend downwards as of writing. Nearest support for the pair sit at 1.3755. However, the U.K retail sales figures for the month of August are due tomorrow and could provide some upward momentum for bulls and the pound if figures return better than estimated results. RSI is currently sitting at 37.74, suggesting some under buying in the market. Cable has broken ground below the 50, 100, and 200 day SMA; furthermore, the pair is edging close to the lower bound of the bollinger bands.

Resistance: 1.3905, 1.3937, 1.3958

Support: 1.3755, 1.368, 1.3604

USDCAD (4- Hour Chart)

USD/CAD trended downwards at the beginning of the trading day, but quickly recovered from the session low of around 1.26, and gained more than 0.5% once the American trading session began. Strong dollar demand has brought the pair to challenge our estimated resistance level of 1.2708, helping the pair regain all of the lost ground since Monday. Speculators, however, should still be mindful that the Loonie is highly dependent on global export and commodity prices, thus indications of international economic slowdown could drag the Loonie lower still and propel USD/CAD to higher levels. The Canadian federal election will take place next Monday, and polls are showing a slight favor to Justin Trudeau’s Liberal party.

From a technical point, USD/CAD is still contained by our previous resistance estimates, but the pair is edging closer to the 1.27 price level. RSI is currently sitting at a marginally over-baught level of 55. USD/CAD has reached the upper bounds of the bollinger bands after today’s dollar rally, and the pair is currently trading above the 50, 100, and 200 day SMA.

Resistance: 1.2708, 1.2834, 1.2912

Support: 1.2589, 1.252, 1.2494

AUDUSD (4- Hour Chart)

The Australian Bereau of Statistics revealed that the unemployment rate fell to 4% in August, compared to 4.6% in July. However, the decline in the unemployment rate is attributed to the lowered participation rate in August. Despite a better unemployment rate in August, the lowered participation rate raised concerns and bearish sentiment for the Aussie dollar. AUD/USD began the day trending lower, and, once the U.S. retail sales figures were released, the pair trended even lower and broke through our previously estimated support level of 0.731. However, as of writing, AUD/USD has successfully defended the 0.7285 support level and the pair is beginning to stabalise around that price level.

From a technical point, RSI indicates 55.38, suggesting neutral buying sentiment. AUD/USD successfully defended our previously estimated support level of 0.7285, but the pair dropped through the 0.731 support level. Currently, the pair trades at the lower bound of the Bolliner bands, and the pair is trading below the 50, 100, and 200 day SMA.

Resistance: 0.7379, 0.7468

Support: 0.7285, 0.7222, 0.7117