After weeks and months of denying that the economic slowing down is transitory, we get more and more signs that the US economy is indeed slowing down, which in return would hold off the Fed from raising rates this year.
Today, almost the entire core economic releases showed a shocking readings, including Retail Sales, Core Retail Sales, CPI and Core CPI and University Consumer Confidence Index, while the industrial production was the only winner, sending the US Dollar lower across the board.
Inflation Slowing Down
The YoY CPI is now down for the fourth month in a row, and it even declines more than the estimates at 1.6% down from 1.9%, while the estimates were to slow down to 1.7%. This is the lowest level since September of last year.
The YoY Core CPI came in unchanged as widely expected at 1.7%. However, it has been declining since January of this year, reaching the lowest level since May of 2015.
The MoM CPI came in unchanged despite the fact that the estimates were to rise slightly by 0.1%, while the Core CPI ticked higher by 0.1%, but less than the 0.2% estimates.
Such figures shows clearly that inflation is not on the right track to hit the 2% target, which would keep the Fed very cautious for another rate hike this year.
Ugly Retail Sales
The Retail Sales figures came in with a shocking deterioration. Both Retail and Core Retail Sales posted the second monthly decline in a row. One we have not seen in both indicators in almost three years.
The Retail Sales declined by -0.2% despite the fact that estimates were to rise by 0.2%. the Core Retail Sales also declined by the same rate, while it had been anticipated to rise by 0.1%.
Positive Industrial Production
Despite the negative outcome of Retail Sales and inflation in addition to the University Of Michigan consumer confidence index, yet, the industrial production showed a notable rise.
It posted the biggest monthly increase in two months, rising by 0.4%. Moreover, the previous reading has been revised higher to 0.1% instead of 0.0%.
USD Tumbles Across The Board
The US Dollar Index is now trading below 95.50 psychological support, which is the lowest level since September of last year.
Such decline is a clear continuation of this year’s down trend, which you don’t want to trade against it anytime soon, even if the Fed is still looking to raise the interest rate once again and/or to unwind its balance sheet.
Investors will always keep an eye on the economic developments to assess the Fed’s possible move. When the numbers are not in favor of the Fed, then don’t bet on the Fed.
In the meantime, the next possible support remains at 95.0 which is a key support that we should keep an eye on over the coming days/weeks.
Any upside retracement after today’s breakdown is likely to be limited below the former support area, which stands at 95.0 and 96.10.
A break of the 95.0 psychological support area is the last thing USD buyers would like to see, as a break of which would clear the way for another leg lower, possibly below 94.0.
Otherwise, we should expect a short term bounce from that support as the technical indicators now are heavily oversold on most timeframes, which support such view.
But again, be careful to chase the current move, you don’t need to short USD at the lows.