It’s a quiet start to the week for the euro, which is trading just above the 1.14 line in the North American session. The US markets are closed today for Martin Luther King Day, so it’s likely to remain an uneventful day for EUR/USD.
There are no tier-1 events on the schedule on Monday, but Germany releases the well-respected ZEW Economic Sentiment index for January on Tuesday. Investor confidence has been improving in recent months, and the trend is expected to continue, with the index projected to improve from 29.9 to 32.0 points. A strong reading would be bullish for the euro.
Markets yawn after US retail sales slide
Last week wrapped up with US Retail Sales for December and the data was weaker than expected. The headline release came in at -2.3% and Core Retail Sales wasn’t much better, with a decline of -1.9%. The weak numbers supported the argument for delaying tightening, but the US dollar wasn’t hurt by the reports, as investor reaction was muted.
Why did the markets shrug off such weak Retail Sales? One reason could be that due to chronic delivery bottlenecks, consumers opted to do their Christmas shopping in November, so the December numbers should not be construed as indicative of weaker consumer spending. The markets also ignored the UoM Consumer Sentiment index for December, which was weaker than expected. The headline print of 68.8 missed the estimate of 70 and was below the 70.6 recorded in December.
Fed policymakers would clearly love to have the support of strong data as they determine a lift-off date for a rate hike. The recent nonfarm payroll report and last week’s retail sales numbers are not what the Fed had in mind, but the focus remains on surging inflation, which means that the Fed will remain in hawkish mode even with these soft employment and consumer spending releases.
- EUR/USD has support at 1.1306 and 1.1197
- There is resistance at 1.1504 and 1.1593
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