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Auto Sales Should Drive Retail Sales and the Dollar

David Becker
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Auto Sales Should Drive Retail Sales and the Dollar

The dollar looks like it will be the strongest of the major currencies as investors examine the recent set of data released for March. Tuesday’s in line ISM manufacturing report had a bright spot in new orders, but compared to the PMI’s released in Europe, and the UK, the data shows that the US is likely the best of the bunch. Also released on Tuesday was a stronger than expected US auto sales report, which helped the dollar gain traction.

The US reported a sharp increase in auto sales on Tuesday. The annual unit pace climbed to 16.33 million from 15.27 million in February. The weather in fact seemed to depress auto sales in February as the March rebound was substantial. This in turn will created strong momentum for retail sales, which should spill over into GDP. With US auto producers accounting for nearly 80% of the increase in auto sales, there are strong signs that growth will be better than expected.

The better than expected data helped lift US yields which in turn helped drive the dollar higher. The dollar tested horizontal trend line support on the USDJPY before traders took profits. Momentum on the currency pair is positive as the MACD (moving average convergence divergence) index generated a buy signal. The index moved from negative to positive territory confirming the bullish crossover signal. The RSI is moving higher with price action reflecting accelerant positive momentum while printing near 61, which is the upper end of the neutral range.

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