Following lower-than-expected US retail sales figures that sparked worries about consumer spending and the US economy’s pace, the EUR/USD pair experienced a recovery. As traders focus on the impending US Producer Price Index (PPI) report, which may rekindle worries about ongoing inflation and affect Federal Reserve policy expectations, the euro’s rebound is still precarious.
Soft US Retail Sales Lead to EUR/USD Rebounds
Following a time of strength, the US economy may be cooling, according to the most recent retail sales report, which revealed a slowdown in consumer spending and fell short of market forecasts. After recent downward pressure, this caused the US currency to sell down, allowing EUR/USD to rise.
Important conclusions from the report on retail sales:
A sudden drop in retail sales may indicate a waning of customer desire.
A more dovish Fed approach may result from less expenditure since it would lessen inflationary pressures.
The EUR/USD recovered thanks to the US dollar’s weakening, although durability is still questionable.
Notwithstanding this temporary respite, attention is now turning to the US PPI report, which may influence market projections for upcoming interest rate decisions by the Fed.
US PPI Report: A Possible Obstacle for the EUR/USD
One important indicator of wholesale inflation that could jeopardize the EUR/USD rebound is the US Producer Price Index (PPI). Concerns about persistent inflation could be heightened if PPI data is hotter than anticipated, which would raise new expectations for the Fed to raise interest rates for extended periods of time. This situation would probably put pressure on the euro and strengthen the US dollar.
In the PPI report, traders should keep an eye on:
Greater than anticipated PPI → Drives the EUR/USD down and supports the Fed’s rate rise argument.
A lower-than-expected PPI might help EUR/USD gains by reinforcing a dovish Fed stance.
In order to determine whether inflation is still a top priority for policymakers, market investors will also pay close attention to Fed speakers and economic forecasts.
Technical Analysis of EUR/USD: Important Levels to Monitor
Although important resistance levels continue to be a hurdle, the EUR/USD pair is making an effort to sustain its recovery.
Levels of Resistance: 1.0800–1.0820 → A break above these could indicate additional upward momentum.
Bullish continuation requires a sustained breach from the strong resistance zone between 1.0875 and 1.0900.
The immediate support zone is between 1.0720 and 1.0700; a break below could lead to more declines.
The critical support level is between 1.0650 and 1.0600; if it is not held, further losses may result.
Though incoming US data will be crucial in determining the pair’s next course, momentum signs point to cautious optimism.
Market Prospects: Wary Trading Before the PPI
The rally is still susceptible to new economic data, even though EUR/USD has rebounded due to dismal US retail sales. We might witness more USD strength, reversing EUR/USD gains, if PPI inflation surprises to the upside. A lower inflation report, however, would enable the pair to continue its recovery.
In tempus aptent taciti sociosqu ad litora torquent per conubia nostra, per inceptos himenaeos.
Jonathan Archer
Important Things to Keep an Eye on:
A significant risk event for the EUR/USD is the US PPI inflation data.
FOMC Member Speeches: Market sentiment may be impacted by any dovish or hawkish overtones.
Eurozone Economic Data: The euro’s strength will be influenced by the Eurozone’s growth and inflation patterns.
Before committing to directional trades in EUR/USD, traders should continue to exercise caution and wait for confirmation indications.
