Pressure Mounts on the FED as Retail Sales Disappoint Again

Friday Market Recap

Asset Current Value Daily Change
S&P 500 2449 0.14%
DAX 12618 -0.18%
WTI Crude Oil 46.49 0.95%
GOLD 1227.00 0.86%
Bitcoin 2275 -4.23%
EUR/USD 1.1441 0.37%

Another month, another huge miss in US Retail Sales; that pattern didn’t break this month, as sales actually declined in June. Bastille Day is still mostly bullish for financial markets despite the release, or maybe because of it. Bad economic news is good news again, as it has been for years and years near the financial crisis. With Janet Yellen voicing her concerns in her testimony this week, investors are once again expecting a less hawkish Fed.

Accordingly, bond yields declined sharply today, retracing a nice chunk of the Draghi-rally of the last three weeks. Yields jumped after the ECB-Conference in Sintra, where Super Mario joined the Fed in the tightening party, at least in words. With the summer season now fully underway, the Fed’s policy is the main driver of the market, with volumes and volatility progressively declining. Today the Japanese Yen and gold are the main beneficiaries so far, as the traditional safe haven assets are helped by the broad weakness in the Dollar.

The British Pound and the Aussie are also very strong today, while the Canadian Dollar is slightly lagging after its strong rally.The Euro is also up, but the momentum is lacking from behind the common currency, as the market knows that the ECB goes where the Fed goes. Crude oil and industrial commodities are rallying as well, but we expect that the performance gap will once again open up between precious metals and industrials, as the low yield low growth environment is bullish especially for gold.

Dollar Index, 4-Hour Chart Analysis

Cryptocurrencies

The major crypto-coins are in the red once again today following the encouraging mid-week bounce. The most valuable and small cap coins are all holding up above their lows, although the short-term trends are still clearly negative, despite the healing of the long-term picture. Ethereum Classic and Bitcoin are still showing relative strength, but the recently rallying LTC and Dash are following the majors lower this time around. All eyes are still on Ethereum, as the coin was in the center of the recent correction, with the steep decline in the small cap coins weighing heavily on the ETH token.

Ethereum, 4-Hour Chart Analysis

Technical Picture

The S&P 500 is very close to its all-time high today, despite the decline in yields that weighs on the financial segment. The NASDAQ is still well off its highs, and the rally remains suspicious, as the most traded index failed to cover significant ground ever since breaking above 2400 earlier this year. That said, with no major bearish catalyst present, the slow trading environment could persist, with the long-term rising trend still being intact.

S&P 500, 4-Hour Chart Analysis

Key Economic Releases on Friday

Time, CET Country Release Actual Expected Previous
14:30 US CPI Index 0.0% 0.1% -0.1%
14:30 US Core CPI 0.1% 0.2% 0.1%
14:30 US Retail Sales -0.2% 0.2% -0.3%
15:15 US Industrial Production 0.4% 0.3% 0.0%
16:00 UK Prelim UOM Sentiment 93.1 95.2 95.1

Key Economic Releases on Monday

Time, CET Country Release Expected Previous
4:00 CHINA GDP 6.9%
4:00 CHINA Industrial Production 6.5%
4:00 CHINA Retail Sales 10.7%
14:30 US Empire Manufacturing Index 19.8

Featured image from Shutterstock

Author:
Trader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.