The EUR/USD is currently pushing the bottom limit of the price action.
Looking at the EUR/USD 4 hourly chart above, we see the currency pair dipped from the region around 1.12 to the region around 1.11. Bearish pressure if sustained, will probably execute a setup for a test of 1.11. A bullish recovery will need to overcome the middle bollinger band before heading back to the important sentiment and technical region of 1.12.
US Data Surprises Up
A number of significant US economic data was reported to be better than expected.
- Core Retail Sales came out at 1% instead of 0.4%
- Retail Sales came out at 0.7% instead of 0.3%
- Philly Fed Manufacturing Index came out at 16.8 instead of 10.1
Retail sales is a fundamental component of the economy. As consumers spend, it translates to revenue and flows up stream as salaries, wholesales purchase, production orders and so on. This result likely came across as a positive indication of the US economy.
As for the manufacturing survey, it is influential as the sentiment of businesses is a leading indicator of economic health. A healthy sentiment suggests that an economy is moving along well while a cautious sentiment may see less business activities due to prudence. A result of more than 50% to the upside is an indication of near term optimism.
These developments likely added positive sentiment about the US dollar into the market. This is a stark contrast to the Euro Zone which saw disappointing economic data such as the German ZEW Economic Sentiment. It was reported to be -44.1 instead of -27.8, more than 50% to the downside.
A few more significant economic data is due to be released:
USA Building Permits
The construction of a building generates many economic activities. Jobs will be created for construction workers, the various sub contractors and services associated with new buildings such as power, water, furniture and so on.
USA Preliminary UoM Consumer Sentiment
Consumer surveys are influential as the sentiment of consumers is a leading indicator of economic health. A healthy sentiment suggests that an economy is moving along well and hence consumers are confident. This likely leads to increased retail sales. A cautious sentiment on the other hand may see consumers spend less in view of a perceived upcoming economic crisis.
There are many more events and hence it is important to follow an economic calendar. By doing so, you can reduce the possibility of an unexpected development affecting your trading plan.
Members can log in to their dashboards for an economic calendar.
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Traders should always practice proper money management and seek to understand the underlying tones for the market.