Forex - GBP/USD gains on solid U.K. retail sales, mixed U.S. data

The pound firmed against the dollar on Thursday after U.K. retail sales beat expectations, while a mixed bag of U.S. economic indicators prompted investors to avoid the greenback amid uncertainty over when the Federal Reserve will begin tapering its stimulus programs.

Monetary stimulus tools such as the Fed's USD85 billion in monthly bond purchases keep the dollar weak by driving down interest rates, and talk of such policies staying in place can soften the greenback.

In U.S. trading on Thursday, GBP/USD was trading at 1.5577, up 0.50%, up from a session low of 1.5496 and off from a high of 1.5594.

Cable was likely to find support at 1.5423, Wednesday's low, and resistance at 1.5752, the high from June 17.

The pound firmed after the Office for National Statistics reported that U.K. retail sales climbed 1.1% in July from June, far outpacing expectations for a 0.6% gain after a 0.2% increase in June.

Retail sales rose 3.0% on year, beating expectations for a 2.5% gain after rising at an annual rate of 1.9% in June.

Core retail sales, which exclude automobile sales, rose 1.1% in July from June, above forecasts for a 0.6% gain, after increasing 0.3% in the preceding month.

Mixed data out of the U.S., meanwhile, clouded the fate of U.S. monetary stimulus programs and repelled many investors away from the greenback.

The Department of Labor reported earlier that weekly jobless claims in the U.S. fell to their lowest level since January 2008 last week, dropping by 15,000 to 320,000.

The Department of Labor also revealed that the U.S. consumer price index rose 0.2% in July from June and 2.0% from July of last year, in line with analysts' forecasts. 

The core consumer price index, which is stripped of volatile food and energy costs, also rose 0.2% in July from June and 1.7% on year, also matching consensus forecasts.

The data reinforced views held by many the economic recovery may be strong enough to prompt the U.S. Federal Reserve to announce plans to taper its monthly USD85 billion bond-buying program this year, though soft output data dampened recent expectations for tapering to begin at the Fed's September meeting.

U.S. industrial production came in flat in July, according to the Federal Reserve, missing expectations for a 0.3% increase.

A separate Federal Reserve report revealed that manufacturing activity in the Philadelphia-region of the U.S. expanded at its slowest pace in four months in August, while manufacturing activity in New York state fell unexpectedly.

The Philadelphia Fed Manufacturing Index fell to 9.3 in August from 19.8 in July, falling far short of market forecasts for a 15.0 reading.

The Federal Reserve's New York Empire State Manufacturing Index fell to 8.24 in August from 9.46 in July, defying expectations for a gain to 10.00.

The data prompted may to trade on expectations that the Fed will put off tapering asset purchases until December and keep the dollar weak via monthly liquidity injections until then.

The pound, meanwhile, was up against the euro and up against the yen, with EUR/GBP down 0.38% at 0.8518 and GBP/JPY up 0.20% at 152.40.

On Friday, the U.S. will release data on building permits, a leading indicator of future construction sector activity, as well as data on housing starts. The University of Michigan is to release its closely watched preliminary data on consumer sentiment.

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Philly Fed Index disappoints – dollar retreats a bit

The Philadelphia Manufacturing Index for August 2013 dropped all the way to 9.3 points. It was expected to slide from the high level of 19.8 to 15.6 points this time. The NAHB Housing Market Index advanced to 59 points. It was expected to remain unchanged. The score of 59 is the highest since November 2005. 

The dollar was on a roll prior to this release thanks to the excellent drop in jobless claims. EUR/USD was trading around 1.3220 and it is now above 1.3230. USD/JPY was at 98.40 and it is sliding down to 98.10. A weaker dollar, but will it last?

Update: EUR/USD resumes its falls and hits a new low of 1.3210. However, USD/JPY remains above the pre-release levels and stands at 98.15 at the time of writing.

All the sub-components are falling: new orders are at 5.3, around half the previous number and employment is down from 7.7 to 3.5 points. It’s important to note that the numbers remain positive, despite the retreat.

Unemployment claims fell to a new 5.5 year low of 320K, better than expected. The 4 week moving average is also at the lowest since 2007 and continuing claims are back under 3 million. This publication had the strongest impact. In addition, inflation came out as expected and “didn’t get in the way”.

The markets ignored other indicators released later and all disappointed: TIC Long Term Purchases, Capacity Utilization Rate and industrial output all fell short, but they only temporarily slowed the dollar.

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US jobless claims at new 5 year low, inflation steady – dollar higher

Weekly jobless claims dropped to 320K – a new low since January 2008. They were expected to stand on 334K, similar to 335K last week (marginally revised from 333K). Continuing claims dropped below 3 million to 2.969 million. They were estimated to slide back to the 3 million level, after jumping above this round number last week. The headline Consumer Price Index (CPI) was expected to rise by 0.2% MoM (0.5% last time before revisions) and 2% YoY (previous 1.8%). Core CPI, which is closely watched by the Fed, was expected to rise 0.2% (previous +0.2%)  MoM and 1.7% YoY (previous 1.6%). All inflation numbers came out exactly as expected.

EUR/USD has been trading steadily under 1.33 and USD/JPY climbed back above 98.20 before the publication. A bigger mover has been British pound: GBP/USD climbed towards 1.56 on excellent retail sales numbers. The dollar is now higher, with EUR/USD below 1.3270, USD/JPY at 98.50.

Update: EUR/USD is hit hard: falling around 60 pips to 1,3234.

The Empire State Manufacturing Index was expected to edge up from 9.46 to 10 points. Here we have a disappointment: the figure dropped to 8.24 points. This figure is overshadowed by employment and inflation.

This is not the end of the big bulk of US figures: we soon have the TIC Long-Term Purchases (13:00 GMT), industrial output and capacity utilization rate (13:15) and most importantly the Philly Fed Manufacturing Index (14:00) which will be accompanied by the NAHB Housing Market Index.

Recent figures in the US have been relatively positive, and there is growing notion that the Federal Reserve will taper its bond buys in September: make the “Septaper”.

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EUR/USD Aug. 15 – Capped on the upside yet again amid thin liquidity

EUR/USD: managed to make an upwards move but was capped by 1.33 once again. The positive GDP numbers are still not digested by the markets. Most of Europe is closed today due to a bank holiday, making liquidity conditions thinner. The pair now relies on important US figures that could guide the Fed: employment and inflation as well as quite a few other numbers. Will the pair choose a direction?

Here is a quick update on the technical situation, indicators, and market sentiment that moves euro/dollar.

EUR/USD Technical

• Asian session: Euro/dollar jumped higher during the Asian session, but couldn’t break 1.33, for the umpteenth time.

Current range: 1.3255 to 1.3300.

Further levels in both directions: 

• Below: 1.3255, 1.3175, 1.31, 1.3050 and 1.30.
• Above: 1.33, 1.3350, 1.3415, 1.3480 and 1.3520.
• 1.3255 is providing weak support. We’ve already seen it dip to lower ground.
• 1.3415, the June peak is now strong resistance just above the round 1.34.

EUR/USD Fundamentals

• 12:15 US FOMC member James Bullard speaks. He is a dove.
• 12:30 US jobless claims. Exp. 334K.
• 12:30 US CPI, exp. +0.2%, Core CPI exp. +0.2%.
• 12:30 US Empire State Manufacturing Index. Exp. +10.2 points.
• 13:00 US TIC Long-Term Purchases. Exp. +31.3 billion.
• 13:15 US industrial output. Exp. +0.5%.
• 13:15 US Capacity Utilization Rate. Exp. 77.9%.
• 14:00 US Philly Fed Manufacturing Index. Exp. +15.6 points.
• 14:00 US NAHB Housing Market Index. Exp. 57 points.

For more events and lines, see the Euro to dollar forecast.

EUR/USD Sentiment

• Critical Septaper data: FOMC member Denis Lockhart said something along the lines of “employment really needs to be terrible to move the tapering decision”. This is dollar positive. However, as we’ve seen previously, Bullard is worried about disinflation. Bullard followed the official line of “it depends on the data”. He’ll speak again but the data is due to overshadow his words. A weakening core CPI could deter the Fed from tapering. Another low figure in jobless claims will certainly raise the tapering expectations. However, tapering remains a close call for both the Fed and the markets.
• Strong core weak periphery: The euro isn’t riding on the good data, and for a reason. Germany and France lead the euro-zone together once again. The news from France is especially encouraging. However, Italy and Spain are still in recession. Can this imbalance continue for a long time? Here are 4 reasons why the euro-zone is out of recession, but not out of the woods.
• Crisis in Egypt not having an impact yet: The bloodshed in Cairo and in other Egyptian cities has a minor effect on the price of oil and does not impact the dollar or the euro just yet. This could change if the situation further deteriorates.
• Lower volume: We are already deep into August, and trading volume has fallen. Assumption Day in Europe also takes its toll today.

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British retail sales +1.1% – GBP/USD extends gains

The volume of retail sales rose by 1.1% (month over month). It was expected to rise by 0.7% in July, following a rise of 0.2% in June. Year over year, sales rose by 3% – a strong figure. Core retail sales also rose by 1.1%.

GBP/USD was trading higher prior to the release, moving up towards 1.5550. The pair is now at 1.5580. EUR/GBP is tumbling down ,now falling below yesterday’s lows and so far it bottomed out at 0.8525.

As mentioned on the FJ fan page, GBP was front running the publication. So, part of the surprise was already priced into the pair before the publication.

Yesterday, sterling received a shining jobs report that was accompanied by somewhat hawkish MPC Meeting Minutes release. It took the pound some time to digest the news, but it eventually made nice gains, especially against the euro.

All in all, the British economy seems to be growing strongly, even if too much of this growth is in the housing sector. This publication adds fuel to the fire and is certainly encouraging.

The peak seen yesterday was just under 1.5550. Support is at 1.5490. The big target for cable is 1.57, the peak seen earlier this year. For more levels, events and analysis, see the GBPUSD forecast.

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What Crocodiles Can Teach You About Trading

Here in tropical Australia, the saltwater crocodile is a fearsome and intelligent predator known to wait patiently for days or weeks on end until unaware prey come to the water’s edge and become its next meal. Crocodiles are by many accounts the most successful animal that has ever lived; they’ve been around for about 200 million years and have out-lived the Dinosaurs, and they’ve evolved over time to become perhaps the most successful predator on Earth, next to humans.  Crocodiles are opportunistic predators; they’ve been known to learn the behavior of their prey and lie in wait for long periods of time almost to the point of starving, and then when the time is right they snatch their prey with confidence and precision.

In fact, it is quite common for people to swim with these animals for days or even weeks without any sign of aggression, until one day somebody goes swimming, fishing or even walking, and they never return. This demonstrates real-world evidence that one of the oldest and most methodical predators on Earth is also one of the most patient and disciplined that has ever lived. Darwin’s survival of the fittest theory certainly favors this creature; they’ve been around since Dinosaur times because their method of hunting and adapting is so successful. The salt water crocodile is perhaps nature’s ultimate “sniper”… it only needs to eat once a week or so because it makes high quality kills rather than a high quantity of low-quality kills.

As traders, there’s a ton of things we can learn from the crocodile, let’s discover some of them…

Crocodiles are a trader’s best role model

The crocodile is actually our best role model as traders; their behavior is really the perfect metaphor for how a trader needs to behave. We are without doubt predators, not just trading predators, but as humans we are naturally built and function as hunters. As traders, we must copy the crocodiles’ methods of hunting; we must be disciplined, patient, adaptable and methodical in our approach. Crocs have also demonstrated an ability to learn quickly and avoid risky situations as we will discuss more about later, these are also things that we need to do as traders.

Think of the crocodile…he’s big, fat, long and needs A LOT of protein in his diet to survive, to swim and to hunt. Is his energy best spent going around all day eating little bait fish which are easy to catch? Imagine how much energy he would expend trying to catch a high quantity of low-quality prey like that all day. If you have ever seen these crocodiles like I have in person, you will understand what I am saying; crocs are designed and have evolved to be patient “sniper” hunters…many little meals do not interest them as much as a big juicy nourishing meal does.

By trading less… our aim is to make a nice large “meaty” size trade that sustains us until our next trade. Sure we may have a few losses along the way to our big prize, but the goal here remains clear; waiting on the sidelines (or the shores of the river like the crocodile) to pounce on our prey and cop a huge nourishing meal. We don’t want to be running all over the pond or river looking for any small piece of meat or fish that we can find…we are going to wait it out and score ourselves a nice big juicy profitable trade (or in the crocodiles case, probably a kangaroo, a dog, or maybe even a human).

There is an expression in the English language that most will have heard at some point in their lives: “All good things come to those who wait”. This phrase is merely discussing the merits of being patient, possibly frugal, disciplined and well planned, but its implications are profound and very true for both the crocodile and the trader.

It may shock some of you to know that nowadays I may trade only 3 times per week or even less some weeks. You’re probably thinking “That’s not enough trades to make money”, I don’t blame you for thinking that way and it’s easy to think that way with most mainstream Forex websites pumping day trading andhigh frequency trading. But, my own personal experience is that it’s much more lucrative to wait patiently for high-quality trade setups than it is to stay glued to your charts all day and night trying to trade everything you can find.  The best trades are obvious, they almost “talk” to you and tell you to trade them, once you know what you’re looking for this will become apparent to you.

For definitions sake I would refer to myself as a swing trader and a trend follower. I attempt to capture the larger moves that occur over multiple trading sessions or possibly multiple days or weeks. In this way, I am very much analogous to a crocodile in my trading, in fact I might even buy a picture of a crocodile and hang it up in my trading office to remind me of how successful a predator the crocodile has been throughout history and most importantly, why it is so successful.

Crocs have a high strike-rate

It’s fairly safe to say that if a croc gets its jaws around its prey, the prey is not getting away.

Crocs have a good strike-rate because they are patient and wait for the “easy” opportunities and then act with confidence and speed…they don’t hesitate. Whereas a Lion might have many failed hunting attempts trying to catch a Gazelle or some other quick animal, expending a lot of energy in the process, crocs tend to have less “losing trades” or failed hunting attempts…because they don’t waste time or energy…they wait and wait and control themselves with precision until their prey almost walks into their mouth…then they feed.

As traders, waiting and being patient can increase your strike rate. Controlling ourselves is really all we can do as traders…we cannot control our “prey” (the market)…we can only conserve our money and wait patiently until our trading edge presents itself. This is how you get a high strike rate as trader, not by trading a hundred times a week in some futile effort to “scalp” the markets.

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How The 80/20 Rule Applies To Forex Trading

Have you ever noticed that most of the money in the world is held by a relatively small minority of people? Or, how about that most people tend to work in short spurts of intense productivity followed by larger periods where they are less productive? There’s an underlying principle that can be used to describe such occurrences, it’s known as the Pareto principle, or the ’80/20 Rule’.

Some of you might be familiar with the ‘80/20 Rule’, some of you might not be. For those of you who haven’t heard of it before or need a refresher, according to Wikipedia, “it is named after Italian economist Vilfredo Pareto, who observed in 1906 that 80% of the land in Italy was owned by 20% of the population; he developed the principle by observing that 20% of the pea pods in his garden contained 80% of the peas”

The 80/20 rule is popular in business studies, sales, economics and many other fields. However, today we are going to discuss how the 80/20 rule applies to trading and the significant positive impact the “80/20 mentality” can have on your trading performance.

How the 80/20 rule applies to your trading

Quick note: These are my personal observations over my 10+ years in the market. The 80/20 rule is not an ‘exact’ science, but it does give you a very effective way to make sense of many aspects of trading and how they all fit together. Also, all ‘80/20’ ratios discussed below should be thought of as “approximate” ratios, meaning they could actually be 75/25 or 90/10, etc.

As Yaro Starak points out in his blog post on the 80/20 Rule and Why It Will Change Your Life:

“By the numbers it means that 80 percent of your outcomes come from 20 percent of your inputs. As Pareto demonstrated with his research this “rule” holds true, in a very rough sense, to an 80/20 ratio, however in many cases the ratio can be a lot higher – 99/1 may be closer to reality.”

I wanted to start off with the above quote by Yaro Starak because in trading, the 80/20 rule is more like 90/10 or sometimes even 99/1 as he says.

How often have you heard “90% of traders fail while only about 10% make consistent money”? Often, I am willing to bet. Whilst the exact ratio of traders who make money vs. those who lose money is obviously almost impossible to pinpoint, it probably is somewhere between 80/20 and 95/5. Have you ever thought to yourself “why is trading apparently so difficult that 80 or 90% of people fail at it?” I’m willing to bet you have, and here is my answer to this pervasive question:

Trading is the ultimate “less is more” profession, but it’s also extremely difficult for most people to come to grips with this fact by accepting the following:

• 80% of trading should be simple and almost effortless, 20% is more difficult
• 80% of profits come from 20% of trades
• 80% of the time the market is not worth trading, 20% it is
• 80% of the time you should not be in a trade, 20% you can be
• 80% of trades should be on the daily chart time frame, 20% can be other time frames
• 80% of trading success is a direct result of trading psychology and money management, 20% is from strategy / system

Let’s delve into each of the above points a little deeper and see how you can start applying them to your trading, and hopefully start improving it, significantly.

80% Simple, 20% Difficult

This one is easy. Most of what we do as traders is sit in front of our computers and look at prices going up or down or sideways. This is not by anyone’s standards “hard” to do. Hell, you can put a 5 year old in front of a chart and ask them which direction they think it will go next and they will probably get it right more often than not. The point is this; determining market direction and finding trades is not hard, people make it hard.

I teach price action as you probably know (honestly, if you don’t know that by now you need to checkout this article right now: price action trading introduction), and it’s not simply some strange coincidence that I teach this particular form of trading, I also personally trade with price action…because it is simple (and effective). The trading strategy you use doesn’t need to involve complex computer algorithms, counting ‘waves’ or interpreting heaps of indicators. In fact, most traders get bogged down with trying every trading method under the sun until they either give up or figure out that they were simply over-complicating what should be a very simple process.

The difficult part of trading is controlling yourself via not over-trading, not risking too much per trade, not jumping back into the market on emotion after a big win or a loss, etc. In short, controlling your own behavior and mindset, as well as properly managing your money are the hardest parts of trading, and traders tend to spend less of their time & focus on these more difficult aspects of trading, probably about 20%, when they should be spending about 80% of their time on them.

80% of profits come from 20% of trades

If you have followed my blog for a while, you know that I am strong proponent of “sniper trading” and waiting patiently for high-probability trade setups, rather than the high-frequency trading style that tends to put so many traders ‘out of business’, so to speak.

It’s absolutely true that most of my trading profits come from a small percentage of my trades. I like to keep all my losing trades contained below a certain 1R dollar value that I am comfortable with, and if I see what I consider an “obvious” price action signal with a lot of confluence behind it, I will go in strong and make a nice chunk of change on the trade if it goes in my favor. Because I trade with such patience and precision, the winning trades I have typically double or triple the 1R risk I gave up on any of my losers. This way, even if I lose more trades than I win, I can still make a very nice return at year’s end.

80% of the time I am not trading, 20% of the time I ‘might’ be

I might trade 4 times per month on average, quite simply because I am a very picky trader. I don’t like to risk money on a setup that isn’t ‘screaming’ at me or what I like to say is “damn obvious”. Most traders like to trade a higher-frequency trading style, and it’s not a coincidence that somewhere around 80 to 90% of them lose money. They are losing money because they are trading way too much and not being patient or disciplined enough to wait for their strategy to really come together and give them a high-probability entry signal.

Do you see the connection between the fact that most traders lose money (around 80%) and about the same amount of time the market is really not worth trading? Markets chop around a lot, and a lot of the time the price action is simply meaningless. As a price action trader, our job is to analyze the price action and have the discipline to not trade during the choppy (meaningless) price action and wait for the 20% or so market conditions that are worth trading.

This point is the most important in this whole article: I get a lot of emails from beginning and struggling traders and I know for a fact that the main thing that separates the professionals from the amateurs in this business is patience and not over-trading. Traders tend to negate their trading edge by trading during the 80% of the time when the market is not worth trading. Instead of waiting for the 20% of the time when it isworth trading, they simply trade 80% to 100% of the time with very little discretion or self-control, like a drunk guy at a casino. Don’t let this be you, remember the 80/20 rule ESPECIALLY as it pertains to trading vs. not trading. If you think you are trading about 80% of the time, you need to evaluate your trading habits and make it more in-line with trading only 20% of the time and 80% of the time should be spent observing and keeping your hands in your pockets (not trading).

80% daily chart trades, 20% other time frames

The daily chart time frame is my “weapon of choice” as far as chart time frames are concerned. I would say it’s pretty accurate that just about 80% of my trades are taken on the daily chart time frame. I won’t get into all the reasons about why focusing on the daily charts is so much better than lower time frames, but you can click the link above to find out more.

However, I would like to point out that there is also a direct connection between the fact that most traders get caught up trading lower time frame charts and most of them lose money. This fits well with the 80/20 rule in that probably only about 20% of traders really focus on higher time frame charts like the daily chart and somewhere around 20% to 10% of traders actually make consistent money. People tend to be drawn to the “play by play” action on the lower time frame charts, almost like they are mesmerized by the moving numbers and flashing colors…unfortunately, this turns into somewhat of a trading addiction for many traders, that quickly destroys their trading accounts.

80% of trading success is psychology and money management, 20% is strategy

In the article I wrote that detailed a case study of random entry and risk reward, I showed how it is possible to make money simply through the power of money management and risk reward. To be clear, I was not and am not saying that you can make a full-time living as a trader without an effective trading strategy. I am simply saying that money management and controlling your mindset is far more important than finding some “perfect, Holy-Grail” trading system that simply does not exist.

You should be focusing about 80% of your trading efforts on money management and controlling yourself / being disciplined (psychology), and about 20% on actually analyzing the charts and trading. If you do this consistently, I can guarantee you that you will see a very positive change in your trading profits, or lack thereof.

Using an effective trading method that is also easy to understand and implement will give you the mental clarity and time to focus 80% on money management and discipline whilst only needing about 20% of your mental energy for analyzing the markets and finding trades. A lot of traders never even get to this point because they are still trying to figure out how the heck to make sense of their trading system.

 Where to go from here with the 80/20 rule…

If you look back over your trading account history from January 1st until now, ask yourself how many of the trades you lost money on where actually valid occurrences of your trading strategy (edge) versus random gambling-type trades that you entered out of emotion or impulse. I’m willing to be that the ratio of emotional trading losses to losses that were the result of anormal statistical losing trade, is about 80/20…surprise, surprise.

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Forex - EUR/USD gains as mixed U.S. data clouds timing of Fed tapering

The euro traded higher against the dollar on Thursday as investors digested mixed economic data and concluded that the Federal Reserve will likely keep dollar-weakening stimulus programs in place possibly through the end of this year.

In U.S. trading on Thursday, EUR/USD was up 0.06% at 1.3264, up from a session low of 1.3205 and off from a high of 1.3310.

The pair was likely to find support at 1.3190, the low from Aug. 2, and resistance at 1.3399, last Thursday's high.

The Department of Labor reported earlier that weekly jobless claims in the U.S. fell to their lowest level since January 2008 last week, dropping by 15,000 to 320,000.

The Department of Labor also revealed that the U.S. consumer price index rose 0.2% in July from June and 2.0% from July of last year, in line with analysts' forecasts. 

The core consumer price index, which is stripped of volatile food and energy costs, also rose 0.2% in July from June and 1.7% on year, also matching consensus forecasts.

The data reinforced views held by many the economic recovery may be strong enough to prompt the U.S. Federal Reserve to announce plans to taper its monthly USD85 billion bond-buying program this year, though soft output data dampened recent expectations for tapering to begin at the Fed's September meeting.

U.S. industrial production came in flat in July, according to the Federal Reserve, missing expectations for a 0.3% increase.

A separate Federal Reserve report revealed that manufacturing activity in the Philadelphia-region of the U.S. expanded at its slowest pace in four months in August, while manufacturing activity in New York state fell unexpectedly.

The Philadelphia Fed Manufacturing Index fell to 9.3 in August from 19.8 in July, falling far short of market forecasts for a 15.0 reading.

The Federal Reserve's New York Empire State Manufacturing Index fell to 8.24 in August from 9.46 in July, defying expectations for a gain to 10.00.

The data prompted may to trade on expectations that the Fed will put off tapering asset purchases until December and keep the dollar weak via monthly liquidity injections until then.

The euro, meanwhile, was down against the pound and down against the yen, with EUR/GBP trading down 0.37% at 0.8518 and EUR/JPYtrading down 0.24% at 129.77.

On Friday, the euro zone is to release official data on consumer price inflation and the trade balance.

The U.S. will release data on building permits, a leading indicator of future construction sector activity, as well as data on housing starts. The University of Michigan is to release its closely watched preliminary data on consumer sentiment.

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Dollar mixed amid Fed tapering uncertainty

The dollar was mixed against the other major currencies in volatile trade on Thursday as U.S. economic data added to uncertainty over how soon the Federal Reserve may start to phase out its stimulus program.

During U.S. morning trade, the dollar was little changed against the euro, with EUR/USD dipping 0.04% to 1.3250, after falling as low as 1.3205 earlier.

The greenback strengthened broadly after the Department of Labor said the number of people who filed for unemployment assistance in the U.S. fell to the lowest level since January 2008 last week, dropping by 15,000 to 320,000. 

Another report showed that U.S. consumer prices rose by a seasonally adjusted 0.2% in July, in line with forecasts. Core consumer prices, excluding food and energy costs, also rose 0.2%, matching forecasts.

The data reinforced the view that the economic recovery is strong enough for the U.S. central bank to start winding up its USD85 billion-a-month asset purchase program later this year.

However, separate reports showed that U.S. industrial production was flat in July, missing expectations for a 0.3% increase. Meanwhile, manufacturing activity in the Philadelphia-region expanded at the slowest pace in four months in August and manufacturing activity in the Empire state fell unexpectedly.

The dollar was lower against the yen, with USD/JPY down 0.31% to 97.81 after briefly touching highs of 98.64.

The pound was close to two-month highs against the dollar, withGBP/USD up 0.41% to 1.5563.

Sterling was boosted after official data showed that U.K. retail sales rose much more strongly than expected in July, fuelling optimism over the economic recovery.

Retail sales climbed 1.1% in July, beating expectations for a 0.6% gain and were 3% higher from a year earlier, as sunnier summer weather boosted sales of food, alcohol, clothing and outdoor items.

The dollar was also lower against the Swiss franc, with USD/CHF sliding 0.13% to 0.9345.

The greenback was mixed against its Australian, New Zealand and Canadian counterparts, with AUD/USD falling 0.33% to 0.9091, NZD/USDup 0.14% to 0.8038 and USD/CAD edging up 0.01% to 1.0341.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, dipped 0.04% to 81.70.

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Forex - GBP/USD trims gains after U.S. data

The pound trimmed gains against the U.S. dollar on Thursday, after the release of positive U.S. data eased expectations for a near-term end to the Federal Reserve's stimulus program, lending support to the greenback. 

GBP/USD pulled away from 1.5594, the pair's highest since June 19, to hit 1.5552 during U.S. morning trade, still up 0.34%. 

Cable was likely to find support at 1.5423, Wednesday's low and resistance at 1.5677, the high of June 19. 

The Department of Labor said the number of people who filed for unemployment assistance in the U.S. fell to the lowest level since January 2008 last week, dropping by 15,000 to 320,000. 

A separate report showed that U.S. consumer prices rose by a seasonally adjusted 0.2% in July, in line with forecasts. Core consumer prices, excluding food and energy costs, also rose 0.2%, matching forecasts.

The data reinforced the view that the economic recovery is strong enough for the U.S. central bank to start winding up its USD85 billion-a-month asset purchase program later this year.

The greenback shrugged off data showing that U.S. industrial production was flat in July, missing expectations for a 0.3% increase.

Other reports showed that manufacturing activity in the Philadelphia-region expanded at the slowest pace in four months in August, while manufacturing activity in the Empire state fell unexpectedly. 

The pound strengthened earlier, after the Office for National Statistics said retail sales climbed by a seasonally adjusted 1.1% in July, beating expectations for a 0.6% gain after a 0.2% increase in June.

Retail sales were 3% higher from a year earlier, beating expectations for a 2.5% gain, after rising at an annual rate of 1.9% in June.

Core retail sales, which exclude automobile sales, rose 1.1% in July, above forecasts for a 0.6% gain, after increasing 0.3% in the preceding month.

Sterling was higher against the euro with EUR/GBP retreating 0.46%, to hit 0.8511.

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Forex - EUR/USD hits session lows after U.S. data

The euro fell to two-week lows against the dollar on Thursday after U.S. economic data boosted expectations that the Federal Reserve will soon start to phase out its stimulus program.

EUR/USD hit 1.3205 during U.S. morning trade, the lowest since August 2; the pair subsequently consolidated at 1.3220, shedding 0.26%.

The pair was likely to find support at 1.3164, the low of July 25 and resistance at 1.3279, Wednesday’s high.

The greenback strengthened broadly after the Department of Labor said the number of people who filed for unemployment assistance in the U.S. fell to the lowest level since January 2008 last week, dropping by 15,000 to 320,000. 

A separate report showed that U.S. consumer prices rose by a seasonally adjusted 0.2% in July, in line with forecasts. Core consumer prices, excluding food and energy costs, also rose 0.2%, matching forecasts.

The data reinforced the view that the economic recovery is strong enough for the U.S. central bank to start winding up its USD85 billion-a-month asset purchase program later this year.

The dollar shrugged off data showing that U.S. industrial production was flat in July, missing expectations for a 0.3% increase.

Other reports showed that manufacturing activity in the Philadelphia-region expanded at the slowest pace in four months in August, while manufacturing activity in the Empire state fell unexpectedly.

The euro was also lower against the pound and the yen, with EUR/GBPdown 0.41% to 0.8513 and EUR/JPY losing 0.35% to trade at 129.64.

Sterling hit session highs against the euro and the dollar earlier Thursday after official data showed that U.K. retail sales rose much more strongly than expected in July, fuelling optimism over the economic recovery.

U.K. retail sales climbed 1.1% in July, beating expectations for a 0.6% gain and were 3% higher from a year earlier as sunnier summer weather boosted sales of food, alcohol, clothing and outdoor items.

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