EUR/USD Forex Technical Analysis – US Retails Sales Just Strong Enough to Keep Euro Capped

The Euro is edging lower immediately after the release of a mixed U.S. Retail Sales report, setting the stage for this afternoon’s release of the minutes from the Fed’s July policy meeting. The initial reaction to the report had Treasury yields rising to their high of the session, giving the U.S. Dollar a slight boost.

U.S. Retail Sales came in unchanged, missing the 0.1% forecast. The previous month was also revised lower to 0.8%. Core Retail Sales, however, jumped 0.4%, better than the minus 0.1% forecast. The previous month was also revised lower to 0.9%.

At 12:40 GMT, the EUR/USD is trading 1.0155, down 0.0016 or -0.16%. On Tuesday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $93.95, up $0.06 or +0.06%.

The EUR/USD was trading lower shortly before the release of the U.S. Retail Sales report after the Euro Zone Flash Employment Change came out worse than expected although the previous month was revised higher. More importantly, however, Flash GDP came in under expectations and the previous month’s reading.

Traders are now bracing for the release of the Fed minutes at 18:00 GMT. Given the recent comments from Fed members, the minutes are expected to be hawkish with policymakers signaling the need for further rate hikes.

Ahead of the retail sales report, the probability of a 75 basis point rate hike was 54.5%. After the report it jumped to 60.5%. This should support the dollar and keep a lid on the Euro.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 1.0123 will change the main trend to down. A move through 1.0368 will signal a resumption of the uptrend.

The short-term range is .9952 to 1.0368. The EUR/USD is currently testing its retracement zone at 1.0160 to 1.0111.

Daily Swing Chart Technical Forecast

Trader reaction to the short-term 50% level at 1.0160 is likely to determine the direction of the EUR/USD on Wednesday.

Bullish Scenario

A sustained move over 1.0160 will indicate the presence of buyers. Taking out 1.0195 will indicate the buying is getting a little stronger with 1.0246 the first target, followed by 1.0284.

Bearish Scenario

A sustained move under 1.0160 will signal the presence of sellers. The first downside target is the short-term Fib at 1.0111, followed by a main bottom at 1.0097.

A trade through 1.0097 will reaffirm the downtrend. This could trigger an acceleration to the downside with the next major target coming in at .9952.