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USD/CAD tests 12-year high, EUR/CHF above 1.09, Markets look to U.S. retail sales data, One year on from “Frankenschock"

- Today US December retail sales may move EURUSD as last week’s strong NFP did not provoke the expected dollar rally
- We believe that higher interest rates may increase downside risks on overall US spending
- AUD/USD: There is still downside potential for the Aussie against the greenback, especially in light of its exposure to Chinese demand, next key support can be found at $0.6250, while on the upside the main resistance area lies at around $0.74
- USD/CAD appears to be unstoppable as the road toward the next key resistance at 1.6187 (high from January 2002) is wide open. However, we believe that a period of stabilisation is increasingly likely
- The Swiss National Bank unpegged the Swiss franc from the euro one year ago to the day, a year later the story remains the same; either the exchange rate adjusts to the upside or the economy will. We believe that the second is the more likely scenario
 
***Yann Quelenn, market analyst: “This Friday will reveal some important US data including December retail sales, PPI and industrial production. The EURUSD is set to move today as last week’s strong NFP did not provoke the expected dollar rally. We believe that the markets are holding out for more data to assess the truly state of the US economy. December's Fed minutes seem upbeat, favouring four rate hikes in 2016. 
 
Retail sales will also be put under the microscope. Consensus is for a weak print at -0.1% m/m vs prior 0.2%m/m. Despite low commodity prices, it turns out that fewer automobiles were purchased in December even if overall car sales jumped to a fifteen-year high in 2015. The better job market conditions have not yet driven Americans to spend as much as they were spending before the crisis. Moreover, higher interest rates may increase downside risks for overall spending. 
 
In the near future, we think that retail sales should go higher as money saved from the lingering low commodities price should push consumption up. Additionally, University of Michigan sentiment is expected to show that the US economy is doing better, however, despite this we believe that there is still a lag between changing a consumption mindset from a recession economy toward a recovering economy.”***
 
Once again, crude oil remained the main driver in overnight trading and drove both equity indices and commodity currencies lower. Crude oil has had a roller coaster ride throughout the entire week as prices swing at least 2% every single day and this Friday is no exception. During the Asian session, West Texas Intermediate fell more than 3%, down to $30.25 a barrel after surging as much as 3.05% in London yesterday. Its counterpart from the North Sea, the Brent crude, plummeted roughly 2% in Tokyo after climbing 2.90% in Europe yesterday.
 
Consequently, commodity currencies suffered another sell-off in Asia with the CAD, NOK, AUD and NZD trading deeply in negative territory. The Australian dollar got hammered in Sydney as it lost another 0.80% against the greenback, down to $0.6933, in spite of an encouraging job report released yesterday. AUD/USD is about to test the key resistance area at around 0.6896-0.69 - it corresponds to the low from September 7th - for the second time this week. From our standpoint, there is still downside potential for the Aussie against the greenback, especially in light of its exposure to Chinese demand (exports to China represents roughly 33%). The next key support can be found at $0.6250 (low from February 2009), while on the upside the main resistance area lies at around $0.74.
 
The Canadian dollar has been printing fresh multi-year lows on a daily basis over the last 2 weeks. USD/CAD is currently trading at 1.4455 after testing 1.4529 in overnight trading, the lowest level since early May 2003 (!). The market seems to have completely given up the idea of a potential loonie recovery, accelerating the sell-off. USD/CAD appears to be unstoppable as the road toward the next key resistance at 1.6187 (high from January 2002) is wide open. However, we believe that a period of stabilisation is increasingly likely, we therefore would be surprised if the loonie consolidates between 1.40 and 1.45 over the next few weeks.
 
It has been a year. The Swiss National Bank unpegged the Swiss franc from the euro one year ago to the day. This morning EUR/CHF is back above 1.09 after hitting 1.0982 yesterday in London as evidence mounts that the Swiss economy will cease to outperform its trading partners in a strong CHF environment. It is always the same story, either the exchange rate adjusts to the upside or the economy will. We believe that the second is the more likely scenario.
 
Today will be a busy day for the US dollar as a fresh batch of important economic data is set for release. Traders will be watching December retail sales, PPI, industrial production and Michigan sentiment index from the US; trade balance from India and Russia; CPI from Italy and Spain.

Friday, 15 Jan, 2016 / 9:53

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Source : http://en.swissquote.com/fx/news

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