American Consumers are Spending

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April 15,2021

US Retail Sales jump 9.8% in March

Treasury yields retreat and Commodity prices climb

US dollar slides against Commodity currency bloc, and is unchanged against EUR

USDCAD open 1.2491-95 Overnight Range 1.2479-1.2527, close 1.2519

FX at a Glance

Source: IFXA/RP

FX Recap and Outlook

“Let’s go shopping.” There is nothing like the promise (or receipt) of free money to get consumers to spend. That’s what American’s did in March and Retail Sales soared 9.8% m/m. the ex-autos component rose 8.4%, and the February results were revised higher.

Initial Jobless Claims were a better than expected 576,000 (forecast 700,000) for the week ending April 9.

Overnight, FX and equity traders blissfully ignore rising geopolitical tensions and are ensconced in their “risk-on” world. The US is reportedly readying new sanctions on Russia for supposedly interfering in the election and negative cyber activity. The European Union is contemplating sanctions of their own for Russia’s military activity on the Ukraine border. China tensions are simmering as well. China is unhappy with the US sending an “unofficial delegation to Taiwan. They warned the US, “don’t play with fire.” Iran is still planning to enrich uranium while negotiating a nuclear treaty.

Asia equity markets followed Wall Street’s lead and closed on a mixed note. The Nikkei 225 was flat, Hong Kong’s Hang Seng Index fell 0.37%, and Australia’s ASX200 climbed 0.51%. The major European bourses and US equity futures are higher. Gold gained 0.6%, while crude prices are unchanged.

EURUSD attempted to breach 1.2000, but the rally stalled at 1.1992, and prices inched back to 1.1958, following the US data. The single currency is buoyed by fading risks from rising US interest rates and broad US dollar selling pressures. Prices are also supported as traders look past the current pandemic and vaccine woes and look ahead to the late summer when most of these issues will just be memories. German March CPI rose 2.0% y/y in March.

GBPUSD languished in a narrow 1.3766-1.3808 range and is sitting just above the low. The currency continues to adjust from being extremely overbought and from the upcoming personnel changes at the Bank of England. GBPUSD is supported by expected robust growth as the reopening of the economy gathers steam. The intraday technicals are bullish above 1.3730.

USDJPY is in the middle of its overnight 108.68-108.96 range. The dip in US 10-year Treasury yields to 1.618% from 1.682% at the beginning of the week, and broad US dollar weakness weighs on the currency pair.

AUDUSD rallied from 0.7707 to 0.7760, supported by rising iron-ore prices and a stellar employment report. Australia added 70,700 new jobs in March, doubling the forecast of 35,000. The unemployment rate fell to 5.6%. NZDUSD went along for the ride, climbing to 0.7179 from 0.7140.

USDCAD punched below support in the 1.2500-10 area and dropped to 1.2479, before drifting higher. Yesterday’s jump in WTI oil prices from $60.80 to $63.44/barrel overnight and bearish US dollar sentiment fueled the sell-off. USDCAD rallied to 1.2521 following the US data and weaker than expected Canada Manufacturing Sales (actual -1.6% vs forecast -1.0%).

There is plenty of US data today, but the focus is on US Retail Sales which are forecast to rise 5.9% m/m compared to -0.3% in February. Sharply higher than expected results could reignite inflation concerns and give the US dollar a boost.

USDCAD Technicals

The intraday USDCAD technicals are bearish below 1.2530. Prices need to break below 1.2440 to avoid consolidating in a 1.2460-1.2560 range. The longer term technicals are bearish. For today, USDCAD support is at 1.2460 and 1.2410. Resistance is at 1.2530 and 1.2560. Today’s Range 1.2450-1.2530

Chart: USDCAD 4 hour