The Bloomberg Dollar Spot Index move higher today. Persistent geopolitical tensions have prevented US Dollar to grow much stronger, but diminished concerns have encouraged investors to leave safe haven assets such as the Yen and Gold, as well as high-risk area currencies such as the Euro.

The Bloomberg Dollar Spot Index move higher today ahead of tomorrow's July retail sales data release that is predicted to record 0.2% improvement, compared to the previous month 0,2% advance. Persistent geopolitical tensions have prevented it to grow much stronger, but diminished concerns have encouraged investors to leave safe haven assets such as the Yen and Gold, as well as high-risk area currencies such as the Euro.

EURUSD

Diminished Risks

Latest development of worldwide geopolitical conflicts reveals diminished concerns. Following the rising threats of ISIS insurgents in Middle East, US President Barack Obama have formally announced support in battle against ISIS in Iraq, something that might be the prelude to the third Iraq War but for the time being is still stand on unknown direction. Meanwhile, Russia is reported to have stopped military drills near Ukraine borders and an Israeli-Palestine peace talk is finally underway in Cairo.

Despite of the aforementioned improvement, market risks remain. Ceasefire attempts in Gaza have repeatedly broken before their due dates before, and Ukrainian government troops are still advancing to recover lost grounds from the separatist. US bombings supposedly have halted ISIS advances, but many doubts if US involvement would effectively stops ISIS or ignite it further.

Global economic situation is no better, with the Eurozone and the UK lead disappointing data releases this week. UK's BRC Retail Sales Monitor recorded a -0.3% (yoy), lower than the expected 0.6% improvement. The German ZEW Economic Sentiment also dropped from 27.1 to 8.6, far lower than what have been expected by analysts. Weaknesses in the rest of the world have made US assets more attractive by comparison, and pushed its currency counterparts down.

EURUSD On Slippery Slope

EURUSD is traded near last week low levels following the release of German ZEW Sentiment, and seems to be in a continued pressure. The multi-country currency has been trying to break beyond 100-EMA line in the last few weeks, but failed to do so. Along with it, pressures on the Euro is expected to remain till the end of the week. However, unexpected improvement of second preliminary GDP that will be released on Thursday might trigger a significant reversal of the EURUSD.


EURUSDEURUSD in H1 timeframe, screencap taken a few minutes after ZEW release


Eurozone is also scheduled to publish CPI report on Thursday, and the data is expected to stay on 0.4%, emphasizing the stalled growth that has been plaguing the region. A reading that is lower than expectation might drive EURUSD lower beyond the current support of 1.3332; but even the slightest improvement might help it to go higher toward resistance 1.3431. The Euro might recover due to the diminished risk of an all out war in Ukraine, but German data has become unusually unsatisfactory in the last week, and people are becoming worried of how it will affect the Eurozone as a whole.