US Dollar in consolidation mood, macro data supports market strengthening
Today we witnessed another session of market consolidation.
The bad news about the evolution of the pandemic in the United States and especially in China, where significant areas of the country have been closed again, has increased the feeling of market risk. The stock markets have once again had an up and down session dominated by indecision and lack of risk appetite.
But as we have already pointed out in previous analyzes, from a technical perspective, it is only a corrective movement that needs to be consolidated before starting the upward path again, as long as we do not see any worsening in the evolution of the epidemic.
It is undoubtedly an element of high uncertainty, although beyond, there is a desire on the part of investors to resume purchases.
For this, the economic figures that will be published will be of great value from now on, and in this sense, today, we have gotten NY Empire State Manufacturing with a much better figure than expected, -0.20 vs. -27 expected.
This figure is not usually a large market-mover. In current circumstances, it may be an indication of a better evolution of the economy, especially given the large gap between the published and expected figures.
USD denominated assets
The most significant economic value will be published on Tuesday, the US Retail Sales, a growth of 8% is expected compared to a -16% drop. Domestic demand and consumer spending are the main elements in assessing the strength of the recovery in the economy after the reopening. A data equal to or greater than expected would mean significant support for the stock markets while weakening the US Dollar.
Jerome Powell, president of the Federal Reserve, testifies again on Wednesday in an appearance that will be closely watched by the markets. It is quite likely that he is more positive about the economy than in recent times.
Although USA30 has suffered a significant drop to the 24400 zone at the beginning of the session, it has strongly rejected these levels to once again be in the support zone around 100-day SMA, currently at 24950. This rejection may be a good indication of the lack of bearish continuity in the market.
EUR/USD has come to touch the support area located at 1.1220 amid a rise in the Dollar that acted as a safe-haven currency in the first moments of fall of the stock markets.
At the moment, the correlation between the movement of the Dollar and the stock markets is high; in fact, the flows that move the different assets depend on that of the stocks almost exclusively.
From a technical view EUR/USD can also be considered that it is having a corrective movement of its last bullish leg.
To continue its bullish path, the pair needs to break above the 1.1320 100-day SMA level and the previous 1.1340 high.
Paradoxically, a good number of Retail Sales US could contribute to this movement, because although it is positive for the American economy, it could weaken the Dollar due to an improvement in risk sentiment with the consequent outflow of flows seeking safe-haven.
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