EUR/USD Advances For a Second Consecutive Session, Boosted By Weak US Data

EUR/USD broke higher in the European session today and was boosted by weaker than expected US retail sales data. While the pair has erased a bulk of the week’s losses, it remains in the red for the week, continuing the pattern of alternating between gains and losses seen over the past six weeks.

Retail sales in the United States declined 0.2% in August versus the analyst consensus for a rise of 0.1%. Core sales rose 0.2%, also missing an expected gain of 0.5% percent. Retail sales figures have come up short in six of the last seven readings.

EUR/USD broke higher in early European trading by scaling above a horizontal level at 1.1922 which was previous resistance in late August and early September. The pair extended higher following the retail sales data although the rally appears to have stalled out near resistance at 1.1979 which marks the spike high printed during the last NFP reading at the start of September.

The currency pair held above support at 1.1886 on a daily basis yesterday and closed in the green to trigger a recovery. Although the pair has wiped a bulk of the week’s gain, the weekly candlestick is on pace to form a bearish hanging man pattern which signals the potential for a further decline.

A major hurdle this week was the 1.2000 handle as the pair failed in a recovery about five points ahead of the level on Wednesday. The psychological handle is seen as the next level of resistance. Support for the pair falls at 1.1922.

Similar to EUR/USD, the US dollar index (DXY) which carries a strong inverse correlation has declined in the past two sessions to give back a bulk of the week’s gain. However, today’s drop has taken the index back below important support from the 2016 spike low of 91.92 to offer a contradicting signal to the currency pair. On a weekly chart, DXY is set to post a bullish inverted hammer.

The correlation with EUR/USD and USD/CHF may not be what it once was but the USD/CHF pair offered a sell signal yesterday as the pair printed a Doji pattern on a daily chart which was much more prominent than the candlestick posted on the EUR/USD chart. The pair offers resistance around yesterday’s open of 0.9638 and a reaction around it, in the event of a recovery, can provide an early signal for EUR/USD.

EUR/USD 4-Hour Chart

EURUSD 4H Sept 15

Jignesh is an analyst and trader, specializing in currencies and commodities. He utilizes a macro view as well as a proprietary method of pattern recognition that is based on the principles of Elliott wave. His focus is to assess strength in trends, and perceiving high potential turning points in the markets. He brings over 4 years of experience in his current role.