The U.S. dollar begins the new trading week on the defensive, trading lower against all of the major currencies as Friday's weaker U.S. retail sales data continues to reverberate through the markets.

Among the majors, EURUSD is up 0.18% and GBPUSD is higher by 0.19%. The Japanese yen is also modestly stronger, with USDJPY down 0.05%. The biggest mover is the Australian dollar, with AUDUSD up 0.62%.

The AUDUSD advance appears to be driven less by fresh Australian news and more by a combination of broad U.S. dollar selling and a relatively hawkish RBA backdrop. Friday's disappointing U.S. retail sales report has prompted traders to scale back expectations for another Fed rate hike, with the probability of a September increase falling to around 30%, from roughly 50% before the data. U.S. yields are modestly lower as a result, helping to put additional pressure on the dollar.

For the Australian dollar, the move is being amplified by the policy divergence between the Fed and the RBA. The RBA remains relatively hawkish, while expectations for additional Fed tightening are being pared back. Technically, the price did break above a swing area between 0.7100 and 0.7113 (see red numbered circles and yellow area on the chart below) and the 61.8% retracement at 0.7119.

In today's Kickstart video, a technical look is taken at the EURUSD, USDJPY and GBPUSD, along with the other major currency pairs, outlining the bias, risk levels and targets — the three things every trader should be aware of as the new trading week gets underway.

China data undershoots

Overnight, the economic news was highlighted by a batch of weaker-than-expected data out of China, which does not support the AUDUSD run higher. The link matters because China is Australia's largest trading partner and its biggest single destination for commodity exports, which makes Chinese activity data a recurring input for Australian dollar sentiment — even on a day when broad U.S. dollar weakness is doing most of the work in driving the pair higher.

Fixed Asset Investment fell 6.7% YTD/Y, weaker than the -6.2% estimate and the -5.7% previous reading. Industrial Production slowed to 4.5% Y/Y versus 5.0% expected and 5.3% previously, while Retail Sales rose just 0.6% Y/Y, well below the 1.5% forecast and down from 1.0% previously.

China's unemployment rate also ticked higher to 5.2% from 5.0%, above the 5.1% estimate, while New Home Prices fell 0.18% M/M after a 0.15% decline previously. Overall, the data continues to point to softness in domestic demand, investment and the property sector.

U.S. stock futures mixed

In the U.S. stock market, futures are mixed, but technology shares are outperforming:

• Dow: -130 points
• S&P: +3.49 points
• Nasdaq 100: +150 points

Sandisk continues its run to the upside, ignited after the company's Investor Day last week (see post here). Shares are up 4.1% in premarket trading. Nvidia shares are up 0.71% as it and OpenAI look to finalize a data center in Ohio. Micron shares are up 2.92% and Marvell shares are up 1.68%. Bloom Energy is up 4.29%, recouping the 2.66% fall on Friday.

Treasury yields lower across the curve

In the U.S. debt market, Treasury yields are modestly lower across the curve:

• 2-year: 4.1626%, down 0.8 basis points
• 5-year: 4.3568%, down 0.7 basis points
• 10-year: 4.6882%, down 0.8 basis points
• 30-year: 5.2635%, down 0.3 basis points

The moves are relatively modest, but the lower yields are consistent with the softer dollar and the scaling back of expectations for additional Fed tightening. The expectation for a September hike is down to 30%.

Commodities and bitcoin

In other markets, crude oil is up $0.16 at $82.56, after trading as high as $83.23 and as low as $81.50.

Gold is also benefiting from the softer dollar — bullion is priced in the U.S. currency and typically moves inversely to it — rising $26.21, or 0.60%, to $4,402.37, while silver is up 1.64% at $65.77. Bitcoin is up 1.26% at $63,626.

Today's North American calendar

On today's North American economic calendar, the main event will be Canadian CPI at 8:30 AM ET. Headline CPI is expected to rise 0.4% M/M, after falling 0.4% previously. Median CPI is expected at 2.0% Y/Y, up from 1.9%, while trimmed CPI is forecast to remain at 1.8%. Median and trimmed CPI are core measures that filter out the most extreme price movements to reveal the underlying inflation trend, which is why they are often watched as closely as the headline print when markets read the report.

Also at 8:30 AM ET, the U.S. Empire State Manufacturing Index, a regional gauge of factory activity from the New York Fed, is expected at 10.6, down from 15.6 previously. At 10:00 AM, the NAHB Housing Market Index is expected to edge lower to 33 from 34.

With the U.S. economic calendar relatively light, Friday's weaker retail sales report, the repricing of Fed expectations and the resulting moves in the dollar and yields should remain key drivers as North American traders enter for the day.