EUR/USD Forecast: US CPI and Retail Sales up next

  • Dollar's sell-off continues with markets in full risk-off mode.
  • US October consumption data to have little effect on Fed's monetary policy path.

Dollar's sell-off not only continues but accelerated in the London morning. The EUR/USD pair soared pass the 1.1820/30 price zone as if the resistance wasn't there, and trades at 1.1840 above pre-ECB's dovish stimulus cut level, and its highest in almost a month. A sharp decline in local equities at the opening is hurting the greenback, with US stocks´ futures challenging  a 1-month low. Markets in full risk-off mode.

The US macroeconomic calendar for today includes October Retail Sales, and CPI, both usually relevant in terms of price reaction, although, with the current market environment,  market's reaction will be relevant only if the reports miss expectations, as they will be in-line with the ongoing trend. Dollar positive reports have to be really solid to trigger a USD recovery that anyway won't be enough to revert the latest losses.

Retail Sales are expected to remain flat monthly basis, from previous 1.6% advance while the retail sales control group number is seen up by 0.4%, matching September's reading. Higher sales indicate growing consumption, which usually evolves in higher inflation, so is a measure towards the future. As for inflation itself, US CPI is seen up 0.1% in October, and up 2.0% from a year earlier, both figures below final September ones. The core readings, which exclude volatile food and energy prices, are seen pretty much unchanged. Producer Prices released yesterday were generally encouraging, suggesting inflation may have started to pick up.

But would that be enough to save the greenback today?  Seems unlikely, as a December rate hike is already fully priced in, and additional hikes won't depend just on this release.

 Technically, the pair is way overextended after adding almost 200 pips straight these last two-days, particularly as it comes from a well-limited range, meaning that the rally could continue despite intraday overbought readings. In the 4 hours chart, the price has accelerated all through its moving averages, and the 20 SMA heads north almost vertically, having surpassed the 100 SMA and on its way to surpass the 200 SMA, usually a sign of a bullish continuation. Technical indicators maintain their upward slopes, despite being at extreme levels, in line with further gains ahead.

1.1852 is so far the daily high and the immediate resistance, with a break above it leading to a test of 1.1890. Beyond this last, 1.1930 is the next possible bullish target. A downward corrective movement could take place if the pair fells below 1.1810, with 1.1770 and 1.1720 as the next intraday supports.

View live chart of the EUR/USD

 

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