China beat the expectations, how do Americans do?
Earlier today, we started a week with positive data from China. Both Retail Sales and Industrial productions in China did better than expectations and increased the market expectations from the United States as well.
While COVID-related restrictions are still in place in large parts of the country, however, service sector activities were not as disappointing as expected, and also the energy rationing also did not weigh on industrial output. For October, retail sales increased by 4.9% year-over-year, and industrial output raised by 3.0%.
For tomorrow, we are waiting to see the same positive results from the United States as well. We have some reasons for this optimism. First of all labor market data were positive and showed some upward revised in numbers, in both employment rates and income levels. On the other hand, because of inflation, we can see the prices increase, especially in YoY measures, so the retail sales that reporting in nominal dollars are not adjusted for inflation, therefore with higher prices we can see the gains in spending. Not just that, as we are already aware of the shortage in supply, it can also be the reason to put the consumers in hurry to do their new year and November holiday shopping a bit earlier in October.
Positive data means that economy is doing fine. Higher retail sales as usual means that factories and different industries working fine, so they are hiring, and that means that both the labor market and manufacturing output must be good and the economy is healthy. At the current time, a healthy economy means it no more needs government supports. The final reason is that expectations for faster tapering with bigger numbers than $15B monthly and sooner rate hikes are not far from reality.
Hawkish policies at the moment, mean nothing other than boosting the US dollar. From the technical point of view also it is in a clear uptrend. In the H4 chart, as you can see in the bellow figure, price moves above both 20 and 50 MA lines, with RSI at 65 and increasing OBV trend line. Main support sits at 94 and as long as it moves above this level, higher numbers are there to be touched.
