US Monthly Retail Sales Overview

Tuesday's US economic docket highlights the release of monthly retail sales figures for July, scheduled later during the early North American session at 12:30 GMT. The report is expected to show that the US consumer has grown more cautious in response to the latest surge in COVID-19 cases. In fact, the headline sales are expected to decline 0.2% during the reported month as against 0.6% growth recorded in the previous month. Excluding autos, core retail sales probably rose by 0.1% in July following the 1.3% rise in the previous month.

According to FXStreet's own analyst, Yohay Elam: “everyone visiting the US has seen its shopping culture, either at the mall or by seeing piles of carton boxes outside houses. However, it seems that economists forecasting the upcoming Retail Sales report for July are either underestimating consumers or at least, being a tad too cautious. That implies figures could beat estimates, boosting the dollar.”

How Could it Affect EUR/USD?

Against the backdrop of a sharp fall in the US consumer confidence, a weaker reading might force investors to further scale back their expectations for an early policy tightening by the Fed. This, however, might fuel worries about the economic fallout from the fast-spreading Delta variant of the coronavirus and overshadow any disappointment from the report. The market concerns should continue to weigh on investors' sentiment and lend some support to the safe-haven US dollar.

Conversely, a surprisingly stronger reading might be enough to provide a modest lift to the greenback. That said, investors might refrain from placing any aggressive bets, rather prefer to wait for the Fed Chair Jerome Powell's speech for clues about the next policy move. Hence, any immediate market reaction is more likely to remain limited. Nevertheless, the set-up remains tilted in favour of bearish traders and suggests that the path of least resistance for the EUR/USD pair remains to the downside.

Meanwhile, Yohay Elam offered a brief technical outlook for the EUR/USD pair: “Euro/dollar is trading in a narrowing wedge, or triangle. Technical analysis textbooks suggest that the narrowing ranges are set to make way for substantially stronger volatility. To what direction? Momentum on the four-hour chart is to the upside and the currency pair trades above the 50 Simple Moving Average. However, it failed to break above the 100 and 200 SMAs. All in all, the picture is mixed.”

Yohay also provided some important technical levels to trade the major: “Support awaits at 1.1755, a swing high from last week, and it is followed by 1.1720 and 1.17. Resistance is at 1.1805, which is Friday's high and where the 100 SMA hits the price. Further above, 1.1825 and 1.1860 are the next levels to watch.”

Key Notes

 •  US Retail Sales Preview: Dollar booster? Low expectations, market mood point to a clear reaction

 •  EUR/USD Forecast: Technicals imply an explosion of volatility, Powell to set the trend

 •  EUR/USD Forecast: Bearish bias remains ahead of EU/US data, Powell's speech

About US Retail Sales

The Retail Sales released by the US Census Bureau measures the total receipts of retail stores. Monthly per cent changes reflect the rate of changes in such sales. Changes in Retail Sales are widely followed as an indicator of consumer spending. Generally speaking, a high reading is seen as positive (or bullish) for the USD, while a low reading is seen as negative (or bearish).

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