US Monthly Retail Sales Overview

Wednesday's US economic docket highlights the release of monthly Retail Sales figures for January, due later during the early North American session at 13:30 GMT. The headline sales are expected to rebound sharply after declining by 1.1% in December and post strong growth of 1.8% during the reported month. Excluding autos, core retail sales probably climbed by 0.8% in January, up from the 1.1% fall recorded the previous month.

According to analysts at NBF: “Car dealers likely contributed positively to the headline number, as auto sales surged during the month. Gasoline station receipts could have increased as well judging from a rise in pump prices. All told, headline sales could have jumped 2.1% in the month. Spending on items other than vehicles may have expanded a bit less, advancing 1.0%.”

How Could it Affect EUR/USD?

Ahead of the key release, the US Dollar stands tall near a multi-week high amid expectations that the Fed will stick to its hawkish stance for longer in the wake of stubbornly high inflation. A stronger-than-expected US macro data will reaffirm hawkish Fed expectations and provide a fresh lift to the Greenback. Conversely, any disappointment from the US Retail Sales figures is more likely to be offset by bets that interest rates are going to remain higher for longer. This, in turn, suggests that the path of least resistance for the EUR/USD pair is to the downside and any attempted recovery could be seen as a selling opportunity.

Meanwhile, Eren Sengezer, Editor at FXStreet, offers a brief technical outlook and writes: “EUR/USD failed to hold above the 50-period Simple Moving Average (SMA) on the four-hour chart despite having tested this level several times on Tuesday. Additionally, the Relative Strength Index (RSI) indicator on the same chart retreated below 50, suggesting that buyers remain on the sidelines.”

Eren also outlines important technical levels to trade the EUR/USD pair: “On the downside, 1.0700 (psychological level, Fibonacci 61.8% retracement of the latest uptrend) aligns as key support. A four-hour close below that level could trigger another leg lower toward 1.0645/50 (static level) and 1.0600 (psychological level).”

“Interim resistance for the pair is located at 1.0730 (50-period SMA) ahead of 1.0760 (Fibonacci 50% retracement). In case the pair rises above the latter resistance, it is likely to face another strong hurdle at 1.0775, where the 200-period SMA is located,” Eren adds further.

Key Notes

 •  US Retail Sales Preview: Forecasts from seven major banks, noticeable increase

 •  EUR/USD Forecast: Euro closes in on key support

 •  EUR/USD: Buying dips below 1.06 targeting 1.0950 – Credit Suisse

About US Retail Sales

The Retail Sales released by the US Census Bureau measures the total receipts of retail stores. Monthly per cent changes reflect the rate of changes in such sales. Changes in Retail Sales are widely followed as an indicator of consumer spending. Generally speaking, a high reading is seen as positive (or bullish) for the USD, while a low reading is seen as negative (or bearish).