U.S. dollar jumps while bonds fall on retail sales data

NEW YORK (Aug 13)  Data today showed retail sales rose 0.2% in July, following a 0.6% gain in June that was larger than previously reported. Apple added 1.1% to $472.61. Fed Bank of Atlanta President Dennis Lockhart will give a speech at 12:45 p.m. on the outlook for the U.S. economy.

Equities: The SEP13 E-mini S&P500 futures (CME:ESU13) traveled higher overnight to 1694, but came down after the retail sales data number was released. Now, this market is trading down 4.5 points to 1682.50. We have a key pivot level in the short term at 1681.50. We have our next downside target at 1669.50, which we would not be surprised to see if the market starts to more actively price in a September tapering announcement. This market has been trading in a fairly small range with 1690 as the midpoint, and we believe we could be in for a breakout to the downside, approaching our key target of 1669.50. 1644 would be our next target below that.

Bonds: The SEP13 U.S. 30-year bond futures (CBOT:ZBU13) are down a somewhat significant amount of 1’19 points to 132’16. This is likely due to the higher revisions to last month’s retail sales number, causing the bond market to be more concerned with a Fed tapering that could be announced next month. We have our next downside target at 131’24. To us, the fact that the bonds are well below our key pivot level of 133’18 tells us this market seems to be in a bearish environment.

Currencies: The SEP13 U.S. Dollar Index futures (NYBOT:DXU13) jumped on the retail sales data, as strong economic data could portend a September tapering announcement, which would likely be a very bullish event for the USD. The USD futures are trading up 48.5 ticks to 81.86. We have our next important resistance level at 82.50, and we believe the USD could potentially head to that level. We still have a big week of data coming up such as PPI, CPI, and manufacturing data. The SEP13 Swiss Franc is down 108 ticks, the SEP13 Yen is down 152 ticks, while the Euro, Pound, and Aussie are all down today as well.