EUR/USD Daily Forecast – Range Break Sets Tone Ahead of US Retail Sales

Fed’s Bullard Looking to Cut Rates Once in 2019

Amidst all the volatility this week, voting Fed member Bullard kept his views unchanged in expecting to cut rates only one more time this year.

Equity markets were under pressure on Wednesday as investor concerns grew on the back of a yield curve inversion. The markets expect the Federal Reserve to jump in and ease rates as the inversion signals a looming recession. However, Bullard did not cave into market demands. He justified that the Fed cannot adjust policy based on every step that takes place in trade negotiations with China.

While there has been unusual volatility in several asset classes, especially for this time of the year, EUR/USD has not been a part of it. The pair continues to fluctuate within its normal and average ranges.

Yesterday’s break lower from a range sets a bit of a bearish tone, however, upcoming data stands to move the pair and often trumps technicals. US retail sales will be released at 07:30EST along with the Philly Fed manufacturing index and unemployment claims.

Technical Analysis

A strong dollar has sent EUR/USD lower and a confluence of support has been broken.

In forecasts over the past few sessions, I’ve discussed support in EUR/USD from the 100 moving average on a 4-hour chart. This indicator had contained the downside in a range that had been playing out since early last week. Now that it has been broken, I see it as the first obstacle to the upside. There is a horizontal level near the moving average at 1.1155 to create a resistance confluence.

To the downside, there is a major level of support at 1.1118. This level held the pair higher in April and May. More recently, as seen on a 4-hour chart, it held the pair higher in late July.

EUR/USD seems to be testing the lower bound of a declining trend channel, although it may be too soon to determine if the channel will contain the downside.

Bottom Line

• EUR/USD has broken down from a range.
• US Retail Sales will be released later today and stands to drive volatility.