After the first day of testimony from Janet Yellen the currency market returned to business as usual. Investors ignored the second day of her testimony and shifted their focus away from the dollar towards safe havens such as the yen. The euro continued to benefit from its role as a funding currency and trended upwards, extending its gains as far as 1.1376. The cable, however, traded lower and dropped towards its support at 1.4380. The GBP/USD defined a current trading range between 1.4590 and 1.4380 and therefore may need a catalyst in order to extend movements above or below that range. The U.S. Retail Sales report and U.S. Consumer Confidence, scheduled for release today, may trigger some movements in the greenback.
The euro traded resiliently above 1.13 on Thursday and euro-bulls must have strong nerves in order to pocket their later profits. Unfortunately we terminated our trading slightly too early and therefore missed out on the last profitable upward move in the EUR/USD.
The most important economic report today will be U.S. Retail Sales due for release at 13:30 GMT. Stronger spending is an indication of strength in the U.S. economy which is why the Fed is closely monitoring this report. Given the forecast of no outstanding rise, the risk is to the downside for the USD. In case the report surprises with a far higher increase than 0.1 percent, the greenback could rally.
Furthermore we have the GDP reports from the eurozone, scheduled for release at 10:00 GMT, which could have a short-term impact on the EUR/USD. Last but not least, Michigan Confidence, due for release at 15:00 GMT could affect the dollar.
Have a nice weekend.
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