Mid-Day Report: Dollar Maintain Gains after Solid Retail Sales

The overall development in the forex markets is unchanged as the weekly close approaches. Dollar stays firm against commodity currencies and yen after positive economic data. Retail sales rose more than expected by 0.6% in August while ex-auto sales rose 0.3% as expected. Import price index dropped -0.9% mom in August. Other data released today saw Eurozone employment rose 0.2% qoq in Q2 while industrial production rose 1.0% mom in July. UK construction output rose 0.0% mom in July. Japan industrial production was revised up to 0.4% mom in July. New Zealand business NZ manufacturing index rose to 56.5 in August.

In UK, the latest YouGov poll showed 52% of responded gave a “Yes” to Scottish independence while 48% said “No”. Meanwhile, the latest “Better Together” poll showed “No” to Scottish independence is having a small lead of 52% to “Yes” 48%. IMF said that the Scottish independence referendum “will raise a number of important and complicated issues that will have to be negotiated”. And, “the main immediate effect is likely to be uncertainty over the transition to a potentially new and different monetary, financial and fiscal framework in Scotland.” According to a Bloomberg survey, 61% of 31 respondents said Scottish independence could trigger 5-10% slide in Sterling against dollars within a month. 36% expected a slide of 2-5%. And 3% expected larger than 10% fall. On the other hand, for a “No” result, 68% expected 2-5% rebound in Sterling, 13% expected 5-10% rise.

ECB governing council member Liikanen said that he wouldn’t rule out any other additional stimulus from ECB. But he emphasized “first we will implement what we have decided.” And he also noted that the council “was unanimous in stating that it can decide on additional measures if needed.” Meanwhile, “a comfortable majority” supported ECB’s announcements last week. Yesterday, ECB president Draghi said the size of the purchase of ABS and covered bonds would have a “sizable impact on our balance sheet, which is expected to move towards the dimensions it used to have at the beginning of 2012.” Back then, the size was between EUR 2.7-3.0T, comparing to the current EUR 2T.

Daily Pivots: (S1) 106.75; (P) 106.97; (R1) 107.31; More…

Intraday bias in USD/JPY remains on the upside with 106.62 minor support intact. Current rise from 101.08 is heading to 100% projection of 96.56 to 105.43 from 101.08 at 109.95 next. On the downside, below 106.62 minor support will turn bias neutral and bring consolidations. But downside should be contained well above 104.67 support and bring another rally.

In the bigger picture, whole medium term up trend from 75.56 is still in progress. We’re not too convinced with the medium term momentum yet and will be cautious on topping above 50% retracement of 147.68 to 75.56 at 111.62. Nonetheless, break of 101.08 is needed to signal medium term reversal, or outlook will stay bullish. Current rally could extend to 61.8% retracement at 120.13 on upside acceleration.

GMT
Ccy
Events
Actual
Consensus
Previous
Revised
22:30
NZD
Business NZ Manufacturing Index Aug
56.5

53
53.5
04:30
JPY
Industrial Production M/M Jul F
0.40%
0.20%
0.20%

08:30
GBP
Construction Output M/M Jul
0.00%
0.60%
1.20%

09:00
EUR
Eurozone Industrial Production M/M Jul
1.00%
0.60%
-0.30%

09:00
EUR
Eurozone Employment Q/Q Q2
0.20%
0.10%
0.10%

12:30
USD
Import Price Index M/M Aug
-0.90%
-1.00%
-0.20%

12:30
USD
Advance Retail Sales Aug
0.60%
0.40%
0.00%

12:30
USD
Retail Sales Less Autos Aug
0.30%
0.30%
0.10%

13:55
USD
U. of Michigan Confidence Sep P

83.1
82.5

14:00
USD
Business Inventories Jul

0.50%
0.40%

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