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US retail sales preview: What to expect of EUR/USD?

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Jan 15, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
    Likes Received:
    FXStreet (Mumbai) - The EUR/USD pair sits above 1.09 handle as the common currency was buoyed by the risk aversion in the markets. The immediate focus now is on the US advance retail sales release.

    Weak US retail sales could worsen risk aversion

    The mood in the global markets is highly risk averse. There are no signs of even a technical recovery in oil, while the volatility in the Chinese Yuan is spooking investors. Furthermore, the US is suffering from a recession in the manufacturing sector. And last but not the least, the financial markets instability is a concern especially for the Fed.

    Hence, the last thing that markets want now is a weaker-than-expected US advance retail sales number. The consumption as represented by retail sales is seen contracting in December, which means consumers saved even during the festive season. Given the mood is risk averse, a weak US data could worsen risk aversion and push EUR/USD higher.

    On the other hand, a positive surprise may become the reason for the weekend profit taking on risk assets shorts. The data could also keep the Fed March rate hike bets alive and hence push the EUR/USD pair lower.

    EUR/USD Technical Levels

    The spot currently trades around 1.0905. The immediate resistance is seen at 1.0940 (61.8% of Mar to Aug rally), ahead of the psychological resistance of 1.10 handle. A break above the same would expose 200-DMA resistance at 1.1043. On the other hand, a break below the immediate support 1.0890 (38.25 of 1.1495-1.0517) could see the pair test the daily low of 1.0854, under which the pair could drop to 1.0813 (50-DMA).
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