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

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

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    The common currency has held up well amid broad based USD strength, restricting losses in the EUR/USD pair ahead of the US advance retail sales release.

    The spot fell to a low of 1.1071 before recovering to trade around 1.1090 levels. Oil driven risk-off in the equities did lit a fire under the pair, but the move failed to chew through offers around 1.1115 (50% of 1.1714-1.0517).

    Pair could drop on better-than-expected data

    The financial markets are under appreciating the possibility of another Fed rate hike, especially since the economy has held up well despite global shocks. Labor market is resilient, personal spending rose sharply in January, while risk sentiment has largely stabilized as well.

    Consequently, demand for the USD is on the rise as a significant majority in the markets is expecting the Fed to come out hawkish.

    A better-than-expected US advance retail sales figure would only add to the possibility of hawkish Fed and could trigger a break in the EUR/USD pair below rising trend line support. On the other hand, a weaker-than-expected figure could open doors for a break above 1.1115 (50% of 1.1714-1.0517).

    The headline figure for February is seen printing at -0.1%. Growth in the retail control group figure is also seen slowing to 0.2%.

    EUR/USD Technical Levels

    A break above immediate hurdle of 1.1115 (50% of 1.1714-1.0517) would open doors for revisit to post ECB high of 1.1218. If the offers around the same are taken out, then the spot could head higher to 1.1296 (23.6% of May 2014 high-Mar 2015 low).

    On the other hand, immediate support is seen at 1.1050 (rising trend line support) + 1.1045 (200-DMA). A violation there would mean short-term bullish invalidation and open doors for a drop to 1.10 (psychological figure) and 1.0974 (38.2% of 1.1714-1.0517).
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