EUR/USD freefall accelerates after strong US retail sales data

By: Crispus Nyaga
Crispus Nyaga
Crispus is an active trader, where he is followed and copied at Capital.com. He lives in Nairobi with his… read more.
on Nov 16, 2021
  • The EUR/USD has been in a major freefall lately.
  • The sell-off continued after the strong US retail sales data.
  • Retail sales jumped by 1.7% in September.

The EUR/USD pair crashed for the fifth straight day as the market reflected on the strong American retail sales numbers. The pair dropped to 1.1353, which was its lowest level since July 2020. It has crashed by more than 8% from its highest level this year.

US retail sales data

The EUR/USD pair declined after the relatively strong US retail sales numbers. According to the statistics agency, the country’s headline sales rose from 0.8% in September to 1.7% in October. This increase was better than the median estimate of 1.2%. 

Are you looking for fast-news, hot-tips and market analysis? Sign-up for the Invezz newsletter, today.

Core retail sales, which strip the volatile food and energy prices, rose from 0.7% to 1.7%. Again, this was a better number than the expected 1.0%. The retail control group jumped from 0.5% to 1.6%.

These numbers mean that American consumers are still doing well even as prices jumped. For one, in the same month that retail sales jumped, inflation jumped to the highest level in more than 30 years. 

This strength could be because of the overall labour market and the fact that many middle-class Americans have substantial savings. The non-farm payrolls data that were released two weeks ago showed that the unemployment rate had declined to 4.6%. Wages also rallied.

The implication of these strong US retail sales numbers is that the Federal Reserve will likely move more aggressively going forward. In the past interest rate decision, the bank decided to hold interest rates steady and lower the amount of quantitative easing. This is likely the main reason why the EUR/USD has been in a steep sell-off.

The pair also declined after the strong Eurozone GDP numbers. According to Eurostat, the Eurozone economy expanded by 3.7% in the third quarter while the employment change improved by 2%.

EUR/USD forecast

EUR/USD

The EUR/USD has been in a deep sell-off recently. On the daily chart, it has managed to move below the 50% Fibonacci retracement level. It is just a few pips above the 61.8% retracement level. At the same time, it has dropped below the key support level at 1.1521, which was the lowest level on October 15th. 

The pair has also moved below the 50-day moving average. Therefore, the path of the least resistance for the pair is lower, with the next key support being at 1.1200.

Invest in crypto, stocks, ETFs & more in minutes with our preferred broker, eToro
10/10
67% of retail CFD accounts lose money