The euro pauses in its rebound phase

Key points from the article:

  • Retail sales limit interest rate increases in the United States
  • EUR/USD: the rebound may continue towards 1.1525

Retail sales limit interest rate increases in the United States

The publication of retail sales came out weaker than expected, which led to an easing on long rates but weighed on the stock markets. The number of rate hikes anticipated by the market is certainly sufficient for the moment.

U.S. retail sales fell 1.9% in December, the biggest drop since February 2021, ending four straight months of strong growth amid rising omicron infections, surging coronavirus inflation and the postponement of a large portion of Christmas shopping to subsequent months due to shipping delays. The figure is much lower than expectations for price stability.

US stock index contracts are down. Disappointing fourth quarter results from JPMorgan Chase and Citigroup have weakened banking stocks and dragged the broader market lower as the fourth quarter earnings season begins. Stock indices extended their losses this morning after data showed U.S. retail sales fell to their biggest drop in 10 months. These sales cause flows towards the dollar reputed to have a safe haven role, which therefore offsets the impact of the fall in rates.

EUR/USD: the rebound may continue towards 1.1525

The euro against the dollar broke out of a horizontal channel from above this week and subsequently broke a bearish slant. Two signals that indicated that a rebound was materializing. The pair should therefore join the former support which becomes resistance at 1.1525 according to the principle of polarity. This objective also corresponds to the postponement of the height of the rectangle.

A return below 1.1383, top of the channel and soon passing the downward slant would invalidate this recovery scenario.

Evolution of the euro against the dollar in daily data:

Twitter @CDamestoy


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