EUR/USD is trading at the bottom end of the 1.1335 to 1.1460 range, leaning to the downside within a well-defined, two week pendulum swing. Can it fall to lower ground this time?
As with the move to the current level, a lot depends on the American side of the equation.
The move to the current range was a result of Janet Yellen’s extreme dovishness. Warning about the global economy, a cautious path on rates and uncertain inflation, she sent the dollar crashing across the board and the euro certainly took advantage of that.
The high range trading reached the post crash highs seen last year: 1.1460 – a level that was a full 1000 off the lows of March 2015 and the line was tested over and over again.
However, after the umpteenth attempt to move higher, the pair is now testing the downside. We do have an inflation figure coming up: the producer price index, which has been positively surprising of late, defying Yellen’s words.
But the main dish is the retail sales report: the US economy is mostly about consumption and more consumption. After too many mediocre and disappointing retail sales reports in 2015, a bump up seen in February (for January) relieved international markets of the doom and gloom that gripped them. However, to the dismay of many, the good data was revised to the downside in the following month.
And now comes an even bigger test: the last report for Q1 comes amid ever falling forecasts for a weaker growth rate and some whispers about an imminent US recession. A poor retail sales report for March will trigger lower forecasts: below the current 0.4% to 0.6% and perhaps into negative territory. Yet a good report will crush these doubts and could help the greenback extend its gains.
EUR/USD trades at 1.1317 at the time of writing. Further support awaits only at 1.1250, followed by 1.1215. Resistance is at the former support line of 1.135.
Will the US data confirm the break or are we witnessing a false one?
More: EUR/USD move towards 1.1750-1.18 expected, Gold a buy
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