The euro has dropped below the 1.18 level in Wednesday trade. Early in the North American session, EUR/USD is trading at 1.1865, down 0.35% on the day.
German retail sales decline again
The locomotive of the eurozone continues to struggle to get on track. German retail sales, the primary gauge of consumer spending, declined by 0.9% in July, after a reading of -1.6% beforehand. The figure was weaker than expected, as the forecast stood at 0.5%. The back-to-back declines point to ongoing belt-tightening by the German consumer, as economic conditions remain weak in the wake of the Corvid-19 pandemic. Weaker consumer spending translates into weaker inflation, and German CPI declined by 0.1% in August, after a decline of 0.5% beforehand.
Euro flirts with 1.20
The US dollar has been under downward pressure and sustained broad losses last week, after Fed Chair Jerome Powell announced that the Fed would allow inflation to exceed its 2% target, as long as the “average” inflation rate remains at the 2% threshold. This means that the Fed will not raise interest rates simply in order to keep inflation from exceeding 2%, which could result in ultra-low interest rates for the foreseeable future. The euro jumped on the bandwagon last week, posting gains of close to 1.0%. EUR/USD flirted with the lofty 1.20 level on Tuesday, but was unable to consolidate and has retreated below the 1.19 mark.
EUR/USD was flat in the Asian session and weakened in European trade. The pair is flat early in the North American session
- EUR/USD broke below support at 1.1872 in the Asian session. Below, there is support at 1.1833, which is under pressure. The 20-day MA is situated just below this line. If the pair breaks below this line, it is a bearish signal
- The next resistance line is 1.1942, followed by resistance at 1.1981
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