Market Review: Three Out Of Three For The Dollar

EUR/USD – The Dollar looks set to end the week on three consecutive days of gains against the Euro with German PPI figures certainly not lending any type of support for the continental currency. Coming in at a flat 0.0%, the Producer Price Index reading from the Euro area’s largest economic contributor seemed to prove that inflation is not the immediate concern. The ramification of this type of number is that the “enhanced credit support measures” instituted by the European Central Bank are likely to remain intact for some time and it could be a while before this liquidity is withdrawn.

For the mid-term outlook; however, it still seems to be a technical play as economic uncertainty keeps drawing traders to the price levels they are familiar with. As of this writing the EUR/USD pair is approaching another important zone of support between 1.3530-40 (the lows of Feb 12 and March 5, 9 and 10). If no support can be found at this level the Euro looks primed to test the lower bounds of the channel which falls near 1.3430.

GBP/USD – After a steady drop the previous two days the Pound Dollar pair has spent the last several hours moving sideways at a very crucial technical level. There are no major macroeconomic announcements scheduled to come out of either the UK or US today and since early in the London trading session this pair has been locked in a tight range between 1.5129 and 1.5165. The bottom of this range falls on the 61.8% retracement of the March 16 low to the March 17 high which corresponds with a 50% retracement of the March 10 low to March 17 high.

As we head into the US trading session there is still a lot of time for the GBP/USD to break out of this very short term range, the question now becomes which direction does it want to head. The bottom of the range and fib levels seem to make a natural pausing point, but with the downward momentum seen previously, it could be just that, a pause before another break lower toward 1.5060. If support is found at this level the move of the last couple days could just be a simple retracement in the overall slight uptrend seen since March 1.

USD/CAD – Almost all of the macroeconomic indicators released today were centered around the Canadian Economy and without exception they have all pointed to CAD strength. CPI in the Northern Nation came in as expected at 0.4%; however, the real surprise came when the Core CPI reading blew past expectations by posting a reading of 0.7%. This was 233% of the expectation and 700% greater than the previous reading.

This news was coupled with positive Canadian Retail Sales figures showing 0.7% growth and a shocking Core Retail Sales figure of a whopping 1.8%. The forecast from economists had been growth of 0.6% and 0.5%, respectively. This news prompted spike in the CAD against the USD of almost 130 pips immediately erased the last two days of US Dollar gains.