Dollar corrects but remains under pressure

The critical event of the Asian session will be the Australian employment report. China will release the House Price Index. Later in the day, reports from the US includes the weekly Jobless Claims, Industrial Production, and the Philly Fed.

Here is what you need to know on Thursday, November 16:

The US Dollar rose, supported by a rebound in US Treasury yields. However, the Greenback appears vulnerable in the short term as cooling inflation in the US suggests that the Federal Reserve is done raising interest rates.

The Producer Price Index (PPI) declined by 0.5% in October, contrary to expectations of a 0.1% increase. The annual rate dropped from 2.2% to 1.3%. These readings align with the Consumer Price Index (CPI) data released on Tuesday, indicating softer inflation. Retail Sales declined by 0.1% in October, against expectations of a steeper slide of 0.3%. The focus now turns to employment data with the weekly Jobless Claims on Thursday.

Analysts at Wells Fargo on Retail Sales:

Overall retail sales slipped only incrementally in October, falling just a tenth of a percent from its upwardly revised level for the prior month. Consumer spending may be losing a bit of momentum, but not as much as had been widely expected given the recent deterioration in various measures of consumer sentiment.

The PPI data further supports the perspective that the Fed has completed its tightening cycle. However, the US Dollar Index (DXY) recovered from monthly lows, rising from 104.00 to 104.40, while the 10-year yield increased from 4.42% to 4.52%.
Stocks on Wall Street were on track for another positive day as investors reacted positively to the US data. China’s activity data improved in October, contributing to market optimism, with Industrial Production and Retail Sales coming in above expectations, showing a 4.6% and 7.6% annual increase, respectively. The Home Price Index is due on Thursday.

EUR/USD retraced from near 1.0900 to 1.0830. The bias remains bullish, but the path to the upside could be challenging due to the stronger economic performance in the US compared to the Eurozone.

GBP/USD retreated from the 100-day Simple Moving Average (SMA) at 1.2505 to 1.2400. The Pound did not benefit from the sharp slowdown in inflation in October. EUR/GBP posted the highest daily close since early May but faced strong resistance at 0.8750.

The rebound in US yields boosted the USD/JPY pair, which climbed over a hundred pips to 151.30. Japan will release Machinery Order and trade data on Thursday.

AUD/USD ended flat on Wednesday around 0.6505 after reaching monthly highs at 0.6542. Australia will release the October employment report, with an expected gain of 20,000 jobs. The Melbourne Institute Consumer Inflation Expectation report is also due.

The New Zealand Dollar was among the biggest gainers, supported by encouraging Chinese data. AUD/NZD fell for the second consecutive day but remains above the critical support level at 1.0770. NZD/USD pulled back after encountering resistance at 0.6055, holding above 0.6000. On Friday, New Zealand will report Q3 wholesale inflation.

Gold pulled back due to the Dollar’s recovery and higher yields, closing around $1,960. The upside remains capped by the 20-day SMA at $1,974. Meanwhile, Silver rose sharply again, closing at $23.45.