Traders wait for US retail sales data

BY Janne Muta

|July 18, 2023

Traders wait for the retail sales to see how the US consumers are coping with elevated costs of living. US equity investors will have to decide how much lower inflation supports the economy, while at the same time, a slowing Chinese economy indicates that the consumer demand in Western nations is now lower partly due to a higher cost of living.

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In China, the impact of lower demand from abroad isn’t balanced by domestic consumption as Chinese consumers are still reeling after the Covid 19 restrictions. They feel they can’t trust the authorities and tend to save more. This impacts European consumer brands that have been relying on demand from China. The retail sales data from the US today will provide investors with additional insights into how effectively consumers are managing the increasing cost of living.

Sluggish GDP growth numbers from China pushed the price of oil lower and the equity markets higher. Lower growth in China together with lower price of oil is a sign of continued normalisation of inflation in the Western nations. As a result, the US equity indices finished the day in the green. Dow (0.2%), S&P 500 (0.4%) and Nasdaq (0.9%) gained slightly as investors expect to see only one 25 bp rate hike from the Fed (next week) before the central bank is expected to cut the rates by 25 bp in March 2024. The benchmark 10-year yield slipped lower to 3.796% (previous: 3.818%). Lower yields helped the gold bulls to push the market higher.

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FTSE is bearish below 7437 and could trade lower to 7320. Above 7437, the market might trade to 7480. The market is in a downtrend and shows signs of potential trend continuation. A decisive break above 7480 would create a trend reversal.

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Gold is bullish above 1945.80 and could trade higher to 1968. Below 1945.80, look for a move to 1938. The market has reversed the earlier downtrend by penetrating and holding above a key resistance level at 1936.

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EURUSD is bullish above 1.1203 and could trade higher to 1.1320. Below 1.1203, the pair could move down to 1.1120. The market remains bullish as the Fed isn’t expected to hike after a 25 bp hike at the July meeting. Instead, the current market expectation is that the Fed will cut the rates by 25bp in March next year.

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NZDCAD is bearish below 0.8357 (Friday’s low). Below the level, the market might move down to 0.8260. Above the level, a retest of 0.8427 looks likely.

The Next Main Risk Events

  • USD - Empire State Manufacturing Index
  • AUD - Monetary Policy Meeting Minutes
  • CAD - CPI
  • USD - Retail Sales
  • NZD - CPI
  • AUD - Employment Change

For more information and details see the TIOmarkets economic calendar.

Trade Safe!

Janne Muta
Chief Market Analyst

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Janne Muta

Janne Muta holds an M.Sc in finance and has over 20 years experience in analysing and trading the financial markets.

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