The dollar started the week with clear positivity, where the dollar index gained versus its six major counterparts. Nevertheless, the gains did not last long as the index head south once again after recording the high of 78.31 extending the losses endured on Friday. Currently the dollar is trading softly below 78.00 areas.
The data from Germany today showed an unexpected drop in retail sales in December, where they dropped 0.3% and down 1.3% on the year. Nevertheless, the data was not able to weaken the euro as it was offset with the higher than expected price gains according to the flash CPI estimate. Inflation rose an annual 2.4% in January remaining above the ECB's upper limit for the second consecutive month which increased expectations that the ECB will press with a stronger monetary stance and shift further towards hawkish as they meet this Thursday.
After the euro recorded the lowest versus the dollar at 1.3568, the pair found good demand to head to the upside. The positive data from France and Italy were also supportive of the gains where the pair touched the high of 1.3673 and currently trading above 1.3575 support and hovering around 1.3665 resistance. The pair now needs a clear breach for 1.3665 resistance eyeing 1.3710-30 to confirm the upside move for the pair.
Sterling continued to trade within the same range for the fourth consecutive session among 1.5989 and 1.5767. The pair is caught in this range since the reported surprise contraction in the fourth quarter on January 25.
Today, sterling versus the dollar recorded the low of 1.5820 and the high of 1.5912 and with the lack of data sterling did not attain the needed support and moved on the back of the dollar's weakness. Greenback is soft ahead of the income report today and the expected subdued inflationary pressures which supported the continuation of the quantitative easing by the feds, keeping the bearish pressure on the dollar.
Currently, sterling needs to stabilize above 1.5820 which is good support to help the rebound to the upside today. Breaching 1.5975 is a good signals for the continuation of the current upside move.
Nevertheless, despite its weakness, the dollar managed to take advantage of the yen's weakness and rose slightly. The pair rose from the lows of 81.90 to record the high at 82.25 and currently trading within a tight range with a slight bias south favoring the yen. The pair is trading below 82.65 resistance which keeps the upper hand for the yen to gain again versus the dollar, while breaching 81.85 signals that the dollar lost its upside momentum for today against the yen.
We are awaiting important fundamentals still today from Canada, where the economy is expected to have expanded in December amid the holiday season. Loonie advanced against the dollar today supported by commodities stability near Friday's highs. The pair declined from the highs set at 1.0026 to 0.9983.