Risk aversion remained the main driver of the Forex market on Tuesday. US dollar index recovered as the greenback strengthened against the euro, British pound and commodity currencies. US retail sales growth slowed down in May, though the headline reading was a bit better than expected. The market will remain in the situation of uncertainty ahead of the Federal Reserve’s meeting and press conference at 18:00 and 18:30 GMT on Wednesday. The US will also release data on producer prices, Empire State manufacturing index and industrial production before the meeting results.
Japanese yen is supported by the safe haven demand: USD/JPY is actively testing levels below 106.00 (200-week MA). Downside targets lie at 105.40 and 104.55. Japanese Finance Minister Taro Aso once again said that the nation’s monetary authorities will act if the exchange rate moves are too rapid. There’s potential for recovery to 106.75/107.00, but at these levels selling interest will likely renew. The bigger picture for the pair will depend on the outcome of the Fed’s meeting.
British pound is moving in a volatile fashion that requires caution from traders, but the bears seem to dominate. GBP/USD twice found support in the 1.4115 area. A close below this level (even at H1) will open the way down to 1.4035/00. Resistance is at 1.4200 and 1.4300. The UK inflation data released on Thursday were weak. On Wednesday Britain will publish labor market figures at 08:30 GMT.
EUR/USD failed to return above 1.1300 and moved down, despite more positive than expected employment and industrial production statistics from the euro area, as all eyes now are on the US and the market’s risk sentiment. The pair can retest support at 1.1150/00. The decline should be limited as traders await the outcome of the Fed’s meeting.
Negative risk sentiment didn’t let AUD/USD to get higher, though the decline attracted new buyers. Support is at 0.7300 ahead of 0.7260. Increase above 0.7405 is needed to open the way to 0.7450 and 0.7500.