EUR/USD Analysis: Retail Sales surprised to the upside, dollar remains the strongest
|EUR/USD Current price: 1.1318
- US Retail Sales posted a solid 0.5% advance in July, core reading bounced from -0.1% to 0.5%.
- Risk aversion fueled dollar's demand at the beginning of the day as Turkey hits the US with tariffs.
The EUR/USD pair extended its decline to a fresh yearly low of 1.1308 ahead of US data release, following another leg lower in local equities, amid returning risk aversion. The German DAX was up but reversed course and reached a one-and-a-half month low, dragging the common currency alongside. Renewed contagion fears came after the Turkish government announced retaliation tariffs on the US, of up to 140%, and persistent dollar's strength that hits the most EM currencies.
US Retail Sales just released surpassed market's expectations, posting a solid 0.5% advance, largely above the 0.1% expected, while the Retail Sales Control Group core reading came in at 0.5%, also beating the market's forecast of 0.4%. June readings, however, suffered downward revisions. The NY Empire State Manufacturing Index surprised to the upside by printing 25.6, up from the previous 22.6. Nonfarm business sector labor productivity increased 2.9% in the three months to June, but on a negative note, Unit Labor Cost fell 0.9% in the same period and according to preliminary estimates, well below the 0.3% advance forecasted.
The market showed quite a limited reaction to the news, with equities bouncing modestly from their recent lows, therefore preventing the USD from an immediate appreciation on the news. Speculative interest is struggling to make up its mind, but the dollar is set to keep winning the battle, with pullbacks probably resulting in more bulls joining -late- the party.
Technically, the 4 hours chart shows that the risk remains skewed to the downside, as it continues developing far below all of its moving averages, with the 20 SMA providing a strong resistance in the 1.1380 region. The Momentum indicator holds within negative levels, slowly grinding lower, as the RSI indicator remains stuck to 30. The pair is extremely oversold in the daily chart, but technical indicators in there maintain their strong downward slopes and at levels last seen in May, with no signs of downward exhaustion yet. As said on the previous updates, bears will retain control as long as the pair remains below 1.1360, while renewed selling interest below 1.1311, July 2017 monthly low, will probably result in another leg lower toward the 1.1250 region.
Support levels: 1.1310 1.1280 1.1250
Resistance levels: 1.1360 1.1385 1.1420
View Live chart for the EUR/USD
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