The dollar traded mixed Friday against its major rivals, the Japanese yen and the euro, but broadly lower against commodity-related currencies.
Chinese data released during the past Asian session lifted investors' moods with rising inflation lessening concerns about the country's health. Asian stocks moved off their lows while European ones surged strongly. European data didn't help the common currency, as inflation in Italy and Spain remained near negative territory in September, still too close to deflationary levels. The European trade balance, however, recorded a larger-than-expected surplus in August, 18.4 billion euros ($20.284 billion) in trade in goods with the rest of the world, compared with 11.2 billion euros in August 2015.
The euro/dollar pair traded a few pips above the 1.1000 figure ahead of the release of U.S. September Retail Sales, which came in slightly better than expected, up by 0.6%, with the core reading surging by 0.5%. Also, the Producer Price Index rose on a yearly basis by 0.7%, against previous 0.0% and the expected 0.2%; the core reading printed 1.2%, matching the market's expectations.
The dollar was modestly higher after the release although still trying to figure out where to go after the news. Later today, the Fed's head Janet Yellen is due to speak at the Federal Reserve Bank of Boston’s Annual Research Conference although she is not expected to provide fresh clues about an upcoming rate hike in the U.S.
Ahead of Wall Street's opening, the euro/dollar pair had a fresh low of 1.0995, although it bounced back from the level quickly. Technically, the one-hour chart shows that the latest upward move stalled short of the 38.2% retracement of the latest bearish run, at 1.1070, while the 20 SMA heads lower around 1.1035, converging with the 23.6% retracement of the same rally. Indicators in the mentioned time frame are bouncing modestly from oversold readings but far from suggesting an upward continuation.
In the four-hour chart, the technical picture favors a downward extension as the price remains below a strongly bearish 20 SMA while technical indicators retreated from their mid-lines, lacking directional momentum but well into negative territory.
- Support levels: 1.0990, 1.0950, 1.0920.
- Resistance levels: 1.1035, 1.1070, 1.1100.
The pound/dollar pair recovered from a daily low of 1.2167 posted in the European morning, up to 1.2260, its highest for the day. Once again, the U.K.'s news front was quiet, with the pair mostly trading on sentiment. Still, fears over a Brexit have receded and will likely be put on hold until the end of the ongoing High Court hearings, which will end Oct. 18.
The pair hardly reacted to U.S. news and maintains a neutral stance in the short term, given that in the one-hour chart, the price is hovering around a directionless 20 SMA while technical indicators are stuck around their mid-lines. In the four-hour chart, the price is a few pips above a bearish 20 SMA while the RSI indicator remains flat around 42 and the momentum indicator turned modestly higher but within negative territory, limiting chances of an upward move.
- Support levels: 1.2190, 1.2150, 1.2100.
- Resistance levels: 1.2270, 1.2315, 1.2360.
Holding near its weekly highs the dollar/yen pair regained the 104.00 level, rallying up to 104.41 during the European morning but surprisingly came under pressure following the release of U.S. positive data as stocks pared gains.
The short-term picture shows that the price is well above a bullish 100 SMA, currently around 103.80, the immediate support while technical indicators are pulling back from overbought territory, indicating that the downward move may extend further, particularly if Wall Street turns negative after the opening.
In the four-hour chart, technical indicators have also turned south from near overbought readings, but the 100 and 200 SMAs keep advancing below the current level, now converging in the 102.30 region. The 100 DMA holds around 102.60; despite short-term retracements, the longer-term outlook will be bullish as long as the price holds above it.
- Support levels: 103.80, 103.35, 103.00.
- Resistance levels: 104.40, 104.70, 105.05.
The Australian dollar/U.S. dollar pair regained the 0.7600 level, rallying up to 0.7645 ahead of the U.S. opening, accelerating its gains in spite of positive U.S. data. The Aussie got a boost for the sudden change in market sentiment after the release of strong Chinese inflation figures, further supported by rates differentials, as the risk of a steeper downward move has been contained, both fundamentally and technically.
Short term, the one-hour chart shows that indicators keep heading higher near overbought levels while the 20 SMA also heads north, well below the current level. In the four-hour chart, technical readings also favor the upside, although a downward correction toward 0.7600 could not be dismissed at this point.
- Support levels: 0.7600, 0.7560, 0.7520.
- Resistance levels: 0.7650, 0.7700, 0.7740.
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