The U.S. Dollar showed its resilience in yesterday’s trading session against the major currencies after the release of disappointing data failed to dent the current uptrend of the world’s most popular currency and put traders on notice about taking short positions against the greenback.
The latest retail sales numbers from the US hit the market yesterday at -1.1% on a Month-on-Month basis in July, which was well short of analysts’ expectations for a figure of -0.3% and once again cast a shadow of doubt over the recovery of the US economy.
Traders with long positions in the Euro, pound and other major currencies should have been celebrating the news, instead they were left flat footed as the greenback unexpectedly rose on the disappointing data, which shows the market is prepared to back the US dollar even in troubled times as a safe haven investment creating something of a win-win environment for the global reserve currency.
The main driver of the currency markets today will be the release of the FOMC minutes by the US central bank where the focus will be on a reduction in their stimulus program
In its last policy meeting, the Fed maintained a dovish stance, leaving the target range for its federal funds rate unchanged at 0-0.25% and their bond buying at the current monthly levels of $120 billion.
Since then, several Fed policymakers such as Raphael Bostic and Esther George have come out in support of tapering asset purchases sooner rather than later, which is putting pressure on Fed Chair Jerome Powell to announce a plan to begin tapering sometime this year with a view to ending the program sometime in 2022.
In today’s trading session the Euro briefly hit a near 10 month low at $1.1701 against its US counterpart before rebounding somewhat, but the EUR/USD currency pair is still below the for support level of $1.1713 which began in November of last year.
This may prove to be the next resistance level as we move into today’s minutes meeting from the US Federal Reserve, and we may see a retest of today’s low of $1.1701 with a possibility of a retreat down to the next support level of $1.1675 if the Fed takes a bullish tone