Bearish view
- Sell the EUR/USD pair and add a take-profit at 1.1600.
- Add a stop-loss at 1.1800.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.1762 and a take-profit at 1.1850.
- Add a stop-loss at 1.1650.
The EUR/USD pair retreated during the American and Asian sessions as traders reflected on the latest US retail sales and manufacturing and industrial production numbers. The pair also declined after a statement by Jerome Powell, the Federal Reserve chair.
US Mixed Economic Data
The market has received mixed economic numbers in the past few weeks. Early this month, the country published relatively strong employment numbers. The data showed that the economy added more than 943k jobs in August while the unemployment rate fell to 5.3%.
Last week, the numbers showed that consumer prices remained elevated in August. The headline Consumer Price Index (CPI) rose by 5.4% in August, the highest number since 2008. Core CPI retreated slightly to 4.3%.
On Tuesday, data published by the statistics agency showed that the headline retail sales declined by 1.1% in July after rising by 0.7% in the previous month. This decline was worse than the median estimate of a -0.3% decline.
Still, the sales rose by 15.78% on a year-on-year basis, mostly because sales were generally low in July last year. The core retail sales that exclude the volatile food and energy prices declined by 0.4% in July. Notably, the numbers came on the same day that Walmart released strong second-quarter earnings.
The EUR/USD also reacted to the latest US industrial production data that showed a 0.9% month-on-month increase. This jump was better than the expected 0.5%. The manufacturing production rose by 1.4% after falling by 0.4% in the previous month.
Meanwhile, in a statement, the Federal Reserve chair said that the US economy was doing relatively well. But he reiterated that the situation remained fluid considering that the number of Covid cases is rising. Recently, several Fed officials like Raphael Bostic and Mary Daly have made the case of winding down the expansive quantitative easing policy.
EUR/USD Technical Analysis
The EUR/USD pair declined even after the relatively weak US retail sales numbers. The pair declined to 1.1715, which was the lowest level since Friday last week. It moved below the 25-day and 50-day exponential moving averages (EMA) while the RSI has dropped close to the oversold level.
It has also completed forming the handle section of the cup and handle pattern. Therefore, the pair will likely continue moving in a downward trend as bears target the key support at 1.1600. This view will be invalidated if the price moves above 1.1765.
