The US Dollar (USD) surged after the release of robust US Retail Sales data, offsetting earlier weakness stemming from easing Middle East tensions. Market focus now shifts to Fed commentary with NY Fed President John Williams and Fed Chairman Jerome Powell scheduled to speak later this week.
Economic Data Recap
- US Retail Sales (March): Both headline and core figures exceeded forecasts, with notable upward revisions to February data. This strong consumer spending data supports a hawkish Fed outlook.
- NY Empire Manufacturing Index (April): While better than expected, the reading remains in contraction territory.
Upcoming Data and Fed Speakers
- Business Inventories (February): Expectations call for a modest 0.3% increase.
- Treasury Auctions: 3-month and 6-month bills
- Fed Speakers: NY Fed’s Williams stressed that recent inflation data was not a turning point for the Fed in considering its stance. Chairman Powell’s address on Tuesday will be closely watched for further guidance.
Market Sentiment
European and US equity markets are positive. The CME FedWatch Tool shows near-certainty of a Fed pause in May with an increased likelihood of a September rate cut. 10-year US Treasury yields are trading near 4.56%.
Technical Outlook: USD Rebounds
The US Dollar Index (DXY) retreated ahead of the Retail Sales release, driven by reduced geopolitical risk. The surge in buying post-data positions the DXY for a potential retest of year-to-date highs.
Key Targets:
- Upside: November 10th high (106.01), 107.00 psychological level, October 3rd high (107.35)
- Support: 105.88 (pivotal level), 105.12, 104.60, confluence of 55-day and 200-day Simple Moving Averages (SMAs) near 103.97/103.84
