US Dollar Trades With Loss Following Bad Retail Sales Data

The US Dollar has been trading in the red after a disastrous US Retail Sales, which missed the 0.2% consensus and resulted in a contraction in retail sales without transportation. This has led to a second wave of US Dollar easing, with the Redbook Index for June now at 5.9% and Industrial Production and Capacity Utilization data for May at 0.9% and 78.2% respectively.

The Federal Reserve Bank of New York President John Williams has made surprise comments about inflation returning to 2%, while the rate outlook remains data-dependent. Other Fed speakers include Fed’s Thomas Barkin, Fed’s Susan Collins, Fed’s Adriana Kugler, and Fed’s Lorie Logan, and newly appointed Alberto Musalem. The Fed’s Austan Goolsbee will also participate in monetary policy discussions at the 2024 Marshall Forum on the University of Chicago campus.


US stocks are experiencing a flip-flopping trend, with the Nasdaq in the red and the other two major US indices in the green. In Europe, both the Stoxx 50 and the German Daw are up by 0.50% on the day. The CME FedWatch Tool shows a 40.4% chance of the Fed interest rate remaining at the current level in September, with odds for a 25-basis-points rate cut standing at 55.0%, while a very slim 4.6% chance is priced in for a 50-basis-points rate cut.

Down -0.03% and trading at 105.301 at the time of writing; the Dollar Index (DXY) is seeing its safe-haven inflows abate on Tuesday, as markets dial down on their bets of political turmoil in Europe after the election outcome. With sovereign bond spreads in the Eurozone easing from their distressed levels, it looks like the dollar might need to look elsewhere for support. Fed speakers will be holding the key as their comments might move the DXY if the hawkish stance prevails even after the softer inflation numbers.

On the upside, no big changes to the levels traders need to watch out for are expected. The first level to watch is 105.52, which held during most of April. The next level to watch is 105.88, which triggered a rejection at the start of May and will likely play its role as resistance again.

Further up, the biggest challenge remains at 106.51, the year-to-date high from April 16. On the downside, the trifecta of Simple Moving Averages (SMA) is still playing support. First, the 55-day SMA at 105.11 safeguards the 105.00 figure. A touch lower, near 104.57 and 104.47, both the 100-day and 200-day SMA form a double layer of protection to support any declines. If this area is broken, look for 104.00 to salvage the situation.