US retail sales disappointment kept the bid for the USD and US stocks soft. US equity indices backtracked a bit. Nasdaq was showed relative strength as it lost only 0.21% while S&P 500 and DJIA both lost around half a percentage point. Core retail sales came in at 0.2% while the headline number was confirmed at 0.3%. The analyst consensus expectation was 0.6% and 0.5% respectively. This supported our short idea on USDJPY which continued lower after a short rally. The main risk events today is the Canadian CPI release. By reading further you agree with our disclaimer at the bottom of this page and acknowledge that we do not provide investment advice.

We suggested yesterday that USDJPY is a market that will remain weak and is likely to move to our target zone at 103.60 – 103.80. The pair rallied a bit but was sold again and is now trading at 103.87, and has been only 4 pips away from the target zone.

Japanese Yen is a safe haven currency and therefore a natural bet for institutional investors that want to diversify their holdings at the time when stocks are trading near resistance levels at all-time highs. Long JPY positions against the USD also make sense when investors have to take into account the potential for new dollar dilution by the future economic stimulus packages in the US. The rising number of Covid-19 cases suggests strongly that there has to be more aid to the US economy. The retail sales disappointment from yesterday also testifies to this. 

We pointed out yesterday also that the silver market making higher lows and should therefore be a long candidate. The price traded below the rising trendline before finding a footing again and is now trading inside the channel again.

All the trendlines and channels are only approximations of trends and therefore these so-called false breakouts happen all the time. What is important here is that buyers came in and pushed the market higher again thus creating a higher low above 24.22. At the time of writing this, the price has broken above a contra-trend regression channel. This and the fact that the price is again trading inside the channel add to the positive technical picture. The new low at 24.32 is now a key support level together with the 24.22 low. The risk for this trade comes from the fact that USDJPY is approaching potential support and EURUSD a resistance at the same time. If USD starts to attract buyers soon it makes it much harder for a XAGUSD (silver priced in US dollars) to move higher.  To counter these risks we bring our target levels lower and keep our exposure to this market lower than usual. The new target zones are as follows, T1: 24.75 – 24.90 and T2: 25.20 – 25.50. For more analysis on this and many other markets, you may want to subscribe to TIOmarkets YouTube channel.

Recent macroeconomic data releases

  • New Zealand Official Cash Rate 0.25%, 0.25 expected
  • US CPI 0.0%, 0.1% expected
  • US Core CPI 0.0%, 0.2% expected
  • US Unemployment Claims 709K, 730K expected
  • US Core PPI 0.1%, 0.2% expected
  • US PPI 0.3%, 0.2% expected
  • Prelim UoM Consumer Sentiment 77.0, 82.1 expected
  • US Core Retail Sales 0.2%, 0.6% expected
  • US Retail Sales 0.3%, 0.5% expected

Macroeconomic data releases today

  • RBA Governor Lowe speaks
  • Candian CPI 0.2 expected

You may access the times and dates in the economic calendar here.

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Janne Muta
Chief Market Analyst

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