What To Expect From US Retail Sales Today

Okay, very good morning to you. Happy Friday, the 14th of May. And generally speaking, sentiment this morning holding up following the positive close that we had on Wall Street, snapping of course a string of consecutive losses we've seen this week as the market's kind of tussled with this idea about transitory inflation and a bit of a recovery coming through yesterday. So the S&P closed up around 1.25 0.7%. The Dow similar margin. The NASDAQ 100 closed up about 0.8%. That kind of carried through into the Asia-Pacific session. That region generally higher as well, finding that impetus from the US close. And looking at the charts this morning, let's just have a quick run-through from a technical perspective of some of these, uh, US-based index futures first. I'm going to start off with the S&P 500. This is just looking at The price performance really of going back to some of the selling pressure that we've had from the beginning of the week. So going back to around Tuesday when it all started to really pick up a bit of pace, the accelerated sell-off that we saw midweek, and then the reversal, and quite powerfully so yesterday from those lower bound levels. As you can see this morning then, continuing to kind of climb a little bit higher through the Asia-Pac region, uh, perhaps now found a little bit of a floor for the moment in futures price as we just get to this area here, which we've just broken out above in the European open, which was the Asia-Pac high range and the high that we saw just before the close on Wall Street, which did see some late selling pressure, uh, yesterday. Got some short-term trend lines on here, uh, for the week, and that one that really held up nicely— I think this is back on Tuesday or Wednesday's briefing— that coinciding the pivot with that trend line higher. It's a really nice short opportunity that I know a few people got hold of to ride that move lower. But on the recovery, it's been well respected, as too has it on the bounce, given the break that we saw in the overnight Asia-Pac session, um, as well. So quick look elsewhere then, uh, the NASDAQ of course. Um, well, before we do, let's just have a look at the S&P on a daily, because on a daily chart, again, this is something we were looking at as well. A slightly longer-term trendline perspective from late October of 2020, early March. And that was the area really that we're keeping an eye on. Still fairly firm in the conviction that lower down you'll get some quite aggressive dip buying. And that area at 4021 we had highlighted yesterday, close proximity to that before we saw that initiation of the, the fairly strong rebound that's underway at the moment. Any further recovery here on the daily Uh, we're trading at 4126 at the moment. 4140 could be quite interesting. It starts to bring in some of those respective lows and highs that we had going back to Thursday last week and Wednesday this week on the recovery. As we'll talk about later, obviously retail sales will be quite a key metric as to how that plays out elsewhere. Before we get into the news headlines, uh, the dollar index at the moment uh, we'll probably explain the currency story. This is looking at the entirety of the week, and obviously you can see the seesaw movement that we've had, and predominantly the pickup here, which was on the back of the CPI reading. And since that point, as you can see, we've basically consolidated from around 1990 at the top, looking on the right-hand side of the chart here, to 1960 at the bottom. And we're close towards the lower bound of that move at the moment. That would be quite key Any breakdown through those lows obviously could open up a steeper reversal down to 90.34, which was around that range high that we had through the best part of the week before the CPI came out. And if that does occur, obviously that could give a supporting hand to further upside and recovery in some of the major dollar-based pairs. On that point then, EURUSD at the moment, um, just be keeping an eye around here, which is the R1, the previous morning's high that we had around this time yesterday, 121.13 in the futures, uh, would be an upside area. Be keeping an eye on if we have any further upside, which we're already seeing kind of trend up this morning with some slight softening in the greenback. As far as cable is concerned, again, we did say yesterday on the higher time frame chart it felt like cable was kind of due A bit of a pullback after that aggressive breakout that we had on Monday following a few different things, of course, with the Scottish vote not constituting enough majority for pushing further forward anytime soon, the referendum call, um, amid the Conservative performance as well at the local elections. We kind of had that breakout, we pulled back, really nice, kind of perfect recovery on the, on the daily chart here. To that area. You can see that zone came back to 140 and we've stabilized since. We're trading about 50 pips above there at the moment. So as far as the day is concerned, um, again, wouldn't get too drawn into the short-term trend line this morning. Be looking more from a kind of zoomed out perspective and not seeing too much respect of these levels here. So I prefer to look at the outer bound range. And on the downside um, the area which was the double bottom really to the price activity from yesterday afternoon and evening. That coincides with the low that we had on the overnight session on Sunday night going into Monday of this week. It's quite a key area to watch. We've got the S1 sitting just below that, 1.4012, and then that 1.40 handle on the daily was obviously quite important as well. On the upside, any price recovery, kind of two near-term areas I'd keep an eye on: 1.4071 in the futures which was yesterday, um, overnight low. And then you've got the R1 as well sitting just above at around 1.4084 this morning in sterling. Um, quick look elsewhere, and let's just have a look at a couple of commodities. As far as oil is concerned, yeah, pretty tough few days for oil. Pretty rapid decline of about 5%, I think it's been, over the course of the last 48 hours or so. Nothing I think that makes me feel particularly bearish. Um, again, I think prudent to just kind of zoom out the chart a little bit, look at the bigger picture. If you look down to where we were trading back just 2 weeks ago at the beginning of May, we are in a relative lower bound of what is a range for the time being. You can see this small centerpiece here, which was the Colonial Pipeline gap. That's kind of business as usual now, as we had known for the last couple of days. And as we trade here at the moment, just finding perhaps a little bit of short-term resistance on the pullback up and around the 64 handle, 63.90, which was those lows you can see tested through Friday last week, Monday, Tuesday, and then in the overnight session as well. So at the moment, kind of keeping an eye in oil at around 63 handle, 63.04, those previous lows in early May and yesterday. And those aforementioned levels on the upside at around $64 handle. So you got a bit of a dollar range there to play with at the moment. And then gold, finally, let's have a look. Yeah, so you had a bit of a, a failed breach of what we were watching with quite a lot of intensity yesterday, which was, you know, will we get a breakdown, a run lower to reverse breakout that we had on Thursday and acceleration of gains in gold on Friday last week. Uh, hasn't materialized though, and since that bounce now we're kind of middle of this kind of range for the time being. And so at the moment I'm not really looking at gold with too much interest at this point. Near-term platform, if we did get that dollar weakness be interested to see if we get the type of price action where, uh, in the interim period of this kind of more broad range on that, um, double top that you've got from yesterday afternoon, you're— an evening, a breakout with a push back above. You've got the R1 sat just above at 34.5, and then for the, the push back up to the top end of the range again up at 42.5, uh, it could be a an interesting play if we do get that dollar move, uh, continue to play out in terms of a break of that Dixie range we discussed, and if that just helps the gold direction going forward. All right, well, let's have a look at a couple of the news stories in play. First off, starting with this, the US CDC has advised that fully vaccinated people do not need to wear masks outdoors and can avoid wearing them indoor in most places. So quite a shift here in what's seen as the traffic light system in the US. They basically have a table where it's like what you can and can't do, and it's those who've been vaccinated, those who haven't, and those who've been vaccinated can do pretty much everything now in America. Um, interesting point though on this particular, um, article is that there are concerns that with rules the same for everyone, there's not enough incentive to people getting vaccinated. So obviously vaccination rates are still moving higher in America. They've slowed down considerably over the last couple of weeks. But how many more people now, if you think about it, if you kind of give people back their freedom, well, then probably the likelihood is there's less likelihood that then they're going to get vaccinated, essentially. And certainly as we go through what Biden's been trying to do is trying to target certain pockets of society that perhaps are slightly more, um, or according to various different studies and polls, a little bit more reticent to take the vaccine. You know, this could well further accelerate that trend, which I don't think is a massive thing, but perhaps it just decelerates further the ability to hit these targets that we're talking about, which was Biden's administration's of 70% vaccinated by July 4th. Obviously as well, whenever you go through a significant shift like this in lockdown loosening, like not wearing masks, even though this is for vaccinated people. How do— how well do people adhere to the rules and so on? And again, how transmissible now will this virus be going further forward? So worth keeping an eye on those numbers. And definitely in the UK, things have obviously— you've had PM Johnson pretty busy yesterday. He said health officials are quite anxious about the COVID-19 variant first identified in India and refused to rule out the possibility of localized lockdowns to stem its spread. And again, kind of already trying to set people's and manage their expectation about the eventual end of lockdown on June 21st, and that there could be some flexibility around that date. Again, whether it happens on June 21st, the week, 2 weeks after, I don't necessarily think that's a big headwind for the pound because inevitably it probably will happen However, this, this particular variant does warrant monitoring, and particularly as we'll get more data coming next week, we'll be able to make a much better, more definitive idea of whether or not that June 21st deadline is going to be realistic or not, and if not, how further delayed might it be. A couple of context here. There's been 1,768 sequenced cases of the most concerning strain from India, as per the chart here. It's known as the B.1.617.2. Um, it's now the second most common variant in the UK because, remember, case rates relatively speaking are quite low at the moment. It accounts for roughly 15% of the virus sampled sequenced over the last 2 weeks. But what's been quite concerning, it's up from just 7% one week earlier. Some are concerned that there are signs that it's even more transmissible than that variant that we had in Kent around New Year when we saw that big breakout start localized in Kent but went nationwide pretty quickly and led to one of the worst situations during the pandemic, if you remember, over that post-Christmas, New Year period. This one potentially is seen as even more transmissible than that. And obviously, as far as the nationwide vaccination rate is concerned, at the moment we're still just over 50% at the moment, so still a fair way to go at this point in time. Others though, and I think this is important, have said not to over-interpret just a small pocket of data, which why we're putting more emphasis on getting some more information next week before we can really draw definitive conclusions. The other thing here is about the demographic, and obviously as, as we get down— I actually got the text yesterday, so I tried to book my vaccination, but the nearest place was like 20 miles away. And being a very recent Londoner having moved out to the suburbs, I don't have a car, and so it's— and it's in like a village hall somewhere in the middle of the woods, so I'm not sure if I can gonna have to wait potentially. But looking here, these are the case— cases arising again. This is of that particular Indian strain and it's circulating, but the rise is concentrated among young and obviously the less vaccinated age groups. So one thing is from a pressure on the infrastructure point of view, that's probably likely not to reoccur given the fact that Again, older people are more subject to being— showing more kind of aggressive symptom reaction to the virus. There's also underlying medical conditions that they already have as well, other treatments in which they're receiving. But obviously it goes some way to show that we're still not quite out of this at the moment. And once again, it's the northwest of England that seemingly has been quite a hotspot and something to look out for in case there is any localized lockdowns. Um, final thing to mention, because other than that it's pretty quiet for news, and then we'll just talk about the data coming out today, um, is Tesla. Um, and I'll bring up the Tesla share price because we were talking about this a little bit yesterday and I was sharing some charts in the community, and perhaps the chart tells a bit of a story of Tesla's ride over the last week. This goes back to a trend line in play from the summer of last year, of which then we broke down through after the share price saw aggressive selling pressure on Monday after Elon's appearance on SNL. This came as obviously Dogecoin, or Dogecoin, other crypto was under some pressure after he called it hustle. Then there was, I think it was Tuesday, production issues highlighted in China. He's done the U-turn on Bitcoin payments, uh, which caused Bitcoin to fall 15% yesterday. That's partially recovered, but their share price got hit again. Their stock price is down about 13-ish percent at the moment, uh, but technically doesn't look too good until we get lower down for support, um, at 542. We closed yesterday at $571. So really tough week here. And once again, he was super active on Twitter last night. He's kind of like the new, the new Trump as far as watching Twitter for sensitivity in an initial asset or product reaction. And after he came out, did the U-turn on Bitcoin, he's now come out and clarified, to be clear, I strongly believe in crypto. But it can't drive a massive increase in fossil use, fossil fuel use, especially coal. And he's giving the pump to Dogecoin again, working with Doge devs to improve system transaction efficiency, potentially promising. And then as always, don't panic, and he's got a picture there of a car. So once again, he's busy at work. I don't know, I can't help but feel this is all just a bit of a usual PR stunt. I know there's a lot of talk and articles written about this whole ESG side of things, and obviously Tesla's now in the S&P. It's a phenomenally large company, but I'm sure Elon Musk is going to continue to be super active on the likes of Twitter over the weekend. So any crypto traders, I definitely would be mindful of that, particularly on the Dogecoin side. Um, quick look at the calendar then for today and what have we got in store. So just going to transition. We have the ECB minutes out later on at 12:30 this morning. Not expecting too much of a great deal there. I wouldn't anticipate much in the way of a market reaction in European assets. Really the focal point today is on the US side of things, and retail sales is coming out at 1:30. Now, US retail sales has gone through these kind of boom-busts, if you like, and very much associated to the timings around the stimulus checks that have been hitting people's bank accounts. So that's showing up in January, and obviously the real blockbuster figure of 9.8% we got last month. As far as today is concerned, the reading is expected to come in at 1%, so slightly slower obviously than 9.8% month-to-month reading we had last, last time out. However, the cash deposits in regards to stimulus checks were made in the second half of the month of March, so there is some suggestion that that might mean there's a bit of a carry-through from spending into April. And also as well, there's been further reopenings on a state level across America, which gives people more optionality to spend their money in different ways that perhaps they couldn't have done before. and so that would be a net positive potentially for, for retail sales. So if anything, perhaps again upside bias to this. I definitely wouldn't be looking for the type of seesaw reaction effect that we had on CPI earlier in the week, but again, this will be quite a key release for later in the session. We also get industrial production at 2:15, University of Michigan preliminary sentiment, so the more market-moving of the two. That's at 3. We are expecting it to rise to 90.4 from 88.3. Um, and that last number at 88.3 for Michigan actually was the highest reading since March 2020, so the highest reading since really the onset of the pandemic, and a growing sense at the time of upward momentum in jobs. Obviously that hasn't quite materialized, as we know, in payrolls yet. But that incomes will persistently be propelled by federal stimulus spending and a growing share of the population becoming vaccinated, generally making people feel more confident about the future. And so we're looking for that to, to continue as a trend for the time being. And Fed's Kaplan, uh, non-voter speaks at 6 o'clock, and then that's it. So I'm gonna leave it there, let you guys get on with the day. Um, remember that the Market Watch podcast is coming out. Piers and I Piers, the head of trading, we're going to have a conversation, get a bit of a deep dive into this inflation transitory argument. So check that out, and I wish you guys good weekend. All right, take care.