US Retail Sales Contracts For The First Time In 5 Months, US Dollar Pulls Back

Written by Terri Belkas, Currency Strategist

US retail sales, as measured by the Commerce Department fell 0.1 percent in July - marking the first negative reading in five months - as motor vehicle purchases plunged 2.4 percent. The news adds to the pile of evidence suggested that US consumers are suffering under the weight of high food and energy prices, along with deteriorating labor market conditions and plunging home prices.

Meanwhile, the Labor Department reported that the US import price index rose 1.7 percent in July to push the annual rate to yet another record high of 21.6 percent. The biggest increases, as usual, stemmed from petroleum and industrial supplies (such as raw materials). However, given the sharp appreciation of the US dollar recently, the August reading of the import price index could actually show much slower gains, if not declines.

Thus far, the news has weighed on the US dollar, but additional US economic releases await the currency this week.

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My observation:

Following this week releases of quarterly reports, it has so far been BAD news for US economy. This also dampen USD.

It was incredibly volatile just before release and usually rally the USD. Thats why i Sell EUR/USD yesterday on my FOREX CHALLENGE.

EARNING my equity back to the healthy 30k. Today, in less than 15 trades, i had managed to up my equity to nearly 60K. Lots of BUYING back EUR/USD.

REASON is simple. Yesterday, news were bad for EUROs. EUR started bearish....
However, Right after that, few hours later, LONDON announces news that it might be running into recession too.

Down went GBP...Sentiment changed. USD shot up against the two counterpart currency. I started selling EUR/USD.

Today, Suddenly i saw USD losing its gripe. I read up more news, IT WAS the release of more reports. BAD NEWS. I closed my EUR/USD and Sell USD/CAD.

That brought me back to nearly 60k.

NOW at 12pm alantic time, (im following the forex challenge timing), I bought EUR/USD @ 1.4882.

Lets see what happens in 5mins ?