EUR/USD rises to fresh highs with US Retail Sales and the Fed on focus

The Euro hits fresh two-month highs above 1.1800, buoyed by US Dollar's weakness.
Hopes of a dovish turn by the Fed are weighing heavily on the US Dollar.
EUR/USD bulls are pushing against 1.1790, with the 1.1830 long-term high in focus.

Guillermo Alcala FXStreet

EUR/USD has received an additional boost from an unexpected improvement in Germany's Economic Sentiment, and rose to 1.1818, its highest level since early July, before easing to the 1.1800 area ahead of the US Session opening. Investors' expectations for a "dovish cut" by the Federal Reserve on Wednesday have been fuelling risk appetite and keeping the US Dollar on the back foot.

Data released by the German Zentrum für Europäische Wirtschaftsforschung revealed that investors are more optimistic about the economic outlook, although their feelings about the current economic situation deteriorated for the second consecutive month. Likewise, the Eurozone Sentiment Index brightened against expectations in September, following a significant deterioration in August.

Beyond that, the market keeps celebrating lower interest rates in anticipation. The US Dollar Index, which measures the value of the Greenback against six major currencies, has dropped to nearly two-month lows, and Wall Street indexes rose to fresh record highs. In this context, risk appetite has offset concerns about French debt, and the Euro (EUR) has risen higher.

Later today, US Retail Sales data is expected to show that consumption eased in August, mainly due to lower purchases of cars. These figures add pressure on the Fed to ease interest rates and are unlikely to provide significant support to the USD.

Euro Price Today

The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Australian Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.39%	-0.30%	-0.25%	-0.08%	-0.04%	0.02%	-0.41%
EUR	0.39%		0.10%	0.02%	0.30%	0.40%	0.40%	-0.01%
GBP	0.30%	-0.10%		-0.04%	0.21%	0.31%	0.30%	-0.12%
JPY	0.25%	-0.02%	0.04%		0.25%	0.29%	0.10%	-0.10%
CAD	0.08%	-0.30%	-0.21%	-0.25%		0.04%	0.05%	-0.33%
AUD	0.04%	-0.40%	-0.31%	-0.29%	-0.04%		0.08%	-0.41%
NZD	-0.02%	-0.40%	-0.30%	-0.10%	-0.05%	-0.08%		-0.37%
CHF	0.41%	0.00%	0.12%	0.10%	0.33%	0.41%	0.37%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).

Daily digest market movers: Hopes of lower interest rates are weighing on the US Dollar

The US Dollar remains on its back foot as the market prices a quarter-point interest rate cut on Wednesday, coupled with a more dovish forward guidance. Investors are starting to think that the Fed is behind the curve and that it will be forced to accelerate its monetary easing cycle with a series of cuts over the next months.
The US Senate has confirmed Trump's former economic advisor, Stephen Miran, as Fed Governor, which grants the US president a dove loyalist on the board from this meeting on.
Fed Governor Lisa Cook will also be on the board at the upcoming two-day meeting, as the Federal Appeals Court has blocked President Trump's bid to fire her on an alleged mortgage fraud.
The German ZEW Economic Sentiment Index improved to 37.3 in September from 34.7 in August, against the market consensus of a decline to 27.3. The Current Situation Index, on the other hand, deteriorated to -76.4 from -68.6 in the previous month, beyond the -75 reading forecasted by market analysts.
In the Eurozone, September's ZEW Economic Sentiment Index has shown an unexpected improvement to 26.1 from 25.1. The consensus had anticipated a decline to 20.3.
Eurozone Industrial Production bounced up 0.3% in July following a June's 1-3% drop. Year-on-Year, factory activity accelerated 1.8% following an upwardly revised 0.7% growth in June. The market's consensus pointed to 0.4% and 1.7% respective increases.
US Retail Sales are seen slowing down to a 0.2% growth in August from 0.5% in July. Excluding vehicles, sales of all other items are expected to have ticked up to 0.4% from the previous month's 0.3% rise.

Technical Analysis: EUR/USD above 1.1790, the next target is 1.1830

EUR/USD continues to head north, as US Dollar weakness weighs more than the Eurozone's domestic issues, at least for now. Technical indicators show a solid bullish momentum, with the Relative Strength Index (RSI) at 66 on the 4-hour chart.

Bulls have pierced the July 24 high at 1.1790, pushing the common currency to the 1.1800 area at the time of writing. Further up, the July 1 high is at 1.1830. A trend-based Fibonacci tool shows the 161.8% extension of the August 27- September 1 high, at 1.1885.

To the downside, a previous resistance is now acting as support at the 1.1750 area ahead of the September 12 low near 1.1700, and the ascending channel's bottom, now around 1.1690. Below here, the September 11 low near 1.1660 would come into view.

Economic Indicator

Retail Sales (MoM)

The Retail Sales data, released by the US Census Bureau on a monthly basis, measures the value in total receipts of retail and food stores in the United States. Monthly percent changes reflect the rate of changes in such sales. A stratified random sampling method is used to select approximately 4,800 retail and food services firms whose sales are then weighted and benchmarked to represent the complete universe of over three million retail and food services firms across the country. The data is adjusted for seasonal variations as well as holiday and trading-day differences, but not for price changes. Retail Sales data is widely followed as an indicator of consumer spending, which is a major driver of the US economy. Generally, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.

Why it matters to traders?

Retail Sales data published by the US Census Bureau is a leading indicator that gives important information about consumer spending, which has a significant impact on the GDP. Although strong sales figures are likely to boost the USD, external factors, such as weather conditions, could distort the data and paint a misleading picture. In addition to the headline data, changes in the Retail Sales Control Group could trigger a market reaction as it is used to prepare the estimates of Personal Consumption Expenditures for most goods.

Economic Indicator

Retail Sales ex Autos (MoM)

The Retail Sales ex Autos data, released by the US Census Bureau on a monthly basis, measures the value in total receipts of retail and food stores in the United States excluding the key sector of motor vehicles and parts. A stratified random sampling method is used to select approximately 4,800 retail and food services firms whose sales are then weighted and benchmarked to represent the complete universe of over three million retail and food services firms across the country. The data is adjusted for seasonal variations as well as holiday and trading-day differences, but not for price changes. Retail sales data is widely followed as an indicator of consumer spending, which is a major driver of the US economy. Generally, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.

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