Euro/dollar opened U.S trading at 1.3285 (8:00 am ET) having fallen from European high at 1.3317 which came after the better than expected German ZEW data (5:00 am ET, current situation 18.3 vs. 12.0, expectations 42.0 vs. 39.9).
Although the U.S. retail sales data at 8:30 am was middling at best, (sales 0.2% vs. 0.3%, ex auto 0.5% vs. 0.4%, control group 0.5% vs. 0.4%) the euro took a sharp drop to 1.3256 within five minutes and to the day's low at 1.3234 by 11:00 am.
After the initial drop the euro recovered to 1.3270 but sellers stopped the rally and the impetus triggered minor stops at 1.3250, stopping at 1.3246. Another brief surge to 1.3259 and sellers again intervened pushing to 1.3236. A final pop to 1.3253 brought out the last group and with rising US yields the dollar halted at the day’s low.
Except for the drop at retail sales, the selling interest was limited in scope and largely intra-day, positions that were taken back in the afternoon as the euro gradually moved back to trade around 1.3260. The base of the two minute drop after the number, 1.3265, acted a resistance throughout the remainder of the day.
Treasury yields had begun to move higher before the sales release. By 8:30 am the 10-year was at 2.68%, up 6 basis points and noon it had reached 2.72% providing support for the dollar. Funds were reported to be selling Treasuries
Comments from Atlanta Fed President Dennis Lockhart, a non-voter at the FOMC, that the central bank could begin reducing its bond buying as early as September even though inflation is well below the Fed's 2.0% target, produced little market reaction.