Four Key Things to watch today: US CPI data, Retail sales numbers, Existing Home sales figure and the FOMC Meeting Minutes

Today, there are a lot of fundamental data to be released for the US. At 1.30 GMT PM, US inflation and retail sales data will be released, followed by existing home sales data at GMT 3.00 PM. Lastly, we have FOMC meeting minutes lined up at GMT 7.00 PM. All these events will be monitored closely by the market in order to weigh the possibilities of QE taper in the current year.

US Inflation data
One of the most influential data is scheduled later in the day. US inflation rate has always played a major role for the Fed to decide and evaluate the situation regarding the reduction of the asset purchases. Recently, in a speech, the Fed’s, Dudley, mentioned that the inflation may reach the Fed’s 2% target sooner or later. So, the market would be evaluating the incoming data very closely. US Core CPI (YoY) is expected to remain at 1.7%, Core CPI (MoM) is also expected to remain at 0.1%, CPI (MoM) is expected to decline from 0.2% to 0.1% and CPI (YoY) is also expected to decline from 1.2% to 1.0% as shown in the figure below.

US Retail Sales data
Retail sales is another factor, which plays an important role in the assessment of the overall economy. US retail sales (MoM) is expected to gain 0.1% this time, and Core retail sales is expected to slow down from 0.4% to 0.1%. There was a sharp drop in the retail sales in September, which caught the US dollar longs off-guard at that time. The market is expecting better numbers this time, and any expected reading may boost the US dollar in the short to medium term.

US Existing Home sales data
US existing home sales data too declined in September from 5.39M to 5.29M as shown in the chart below. This time the market is expecting another decline from 5.29M to 5.13M. In my opinion, we can witness a better than expected reading for the home sales. However, any further decline in the existing home sales can put a lot of pressure on the US dollar.

These data are likely to have a major impact on the US dollar, as they are major indicators to assess the chances of the QE taper in 2013.

US FOMC Meeting Minutes
Furthermore, one of the market moving events is scheduled at 7.00 PM GMT, FOMC meeting minutes. In the last meeting, Fed made no changes in the asset purchases and interest rates. However, the last statement was less dovish than the expected. The Fed also removed a clause from the statement regarding the tighter financial conditions. It would be interesting to see whether the Fed provides any hints regarding the possibilities of tapering in the minutes. The investors will be eying this event closely after the recent dovish comments by the Fed’s Yellen. She raised her support for the ongoing asset purchase program, and stated that the recovery in the labor market is still weak. So, the minutes may highlight the possibility of a delay in the reduction of asset purchases. Currently, the market is divided on the timing of tapering. Thus, all the incoming data and information may play a critical role in how the dollar trades.

Technically, EURUSD has retraced more than 50% of the lost ground in the past two weeks. The pair traded as high as 1.3578, early in the Asian session. The pair traded a touch higher above the 50% retracement level of the last down move as shown in the 4 chart below. The pair found resistance in the form of 200 moving average on the 4 hour chart. The next major resistance is at around 1.3620, which represents the 61.8% retracement level. It would be interesting to see whether today’s outcome manages to stall the EURUSD rally or not. Support comes in at around 1.3510/20 level for the pair.

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