- The EUR/USD pair rose today as traders shrugged-off the second wave in most countries.
- It also reacted to weak Eurozone inflation and trade numbers.
- US retail sales rose by 1.6% in September even as congress failed to pass a stimulus deal.
Eurozone inflation mild
Consumer price inflation in the Eurozone dropped from -0.2% to -0.3% in September as the bloc continued recovering from the pandemic. This CPI was significantly lower than the 1.2% increase in the same period in 2019.
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According to Eurostat, the biggest laggards were Greece, Cyprus, and Estonia while the top performers were in Poland, Hungary, and Czech Republic. By sectors, the price of food, alcohol, and tobacco was the biggest gainers, rising by 0.34%. The price of services rose by 0.24% while that of non-energy products fell by 0.08%.
In the same month, core CPI, which excludes the volatile food and energy products, rose by 0.2%. Excluding tobacco, the prices rose by 0.1%.
Eurostat also released trade numbers from the Eurozone. The numbers showed that the bloc’s exports fell by 12% to €156 billion in August. Imports fell by 13.5% to €141 billion, pushing the overall trade surplus to €14.7 billion. Similarly, trade amongst European countries dropped to €129 billion.
US retail sales jump
The EUR/USD also reacted to the relatively strong US retail sales numbers. Data from the commerce ministry showed that the volume of sales rose for the fifth straight month. The sales rose by 1.9% to $549 billion. That was a bigger number than August’s increase of $539 billion. The median estimate in a Reuters survey was a smaller increase of 0.7%.
According to the bureau, the core retail sales, which exclude the volatile food and energy products, rose by 1.5% while the retail control rose by 1.4%. Excluding autos and gas, the price rose by 1.5%.
These numbers show that US consumers are relatively strong even as the unemployment rate remains above 7%. Data released yesterday showed that the number of Americans who filed for jobless claims increased by 890k while more than 10 million Americans are still getting unemployment benefits.
Analysts believe that the US economic recovery will be stronger if congress passes a new stimulus bill. This seems to be impossible because of the differences between what the White House and congress have proposed.
EUR/USD technical outlook
The daily chart shows that the EUR/USD price has been in a relatively tight range this week. The pair is trading at 1.1727, which is slightly above last week’s low of 1.1615. The price is also slightly above the 23.6% Fibonacci retracement level. It is slightly below the 25-day and 15-day exponential moving averages. Most importantly, the price seems to be forming a head and shoulders pattern.
Therefore, for today, I expect that the price will remain at the current level. However, in the coming week, the price may resume the downward trend.