EUR/USD continued lower in early day trading today and extended losses following a better than expected US retail sales report. The pair fell through a rising trendline today and briefly traded below last Wednesday’s low to trade at a two week low.
The rising trendline in EUR/USD connects last Wednesday’s low with lows posted on Thursday. The pair held above it during the North American session yesterday but fell through it in the Asian session.
The drop below last week’s low has set a succession of lower highs and lower lows from the peak on August 2nd. The combination of today’s break lower and the rising trendline breach signals a bearish bias.
Retail sales in the United States was reported to rise 0.6% in July, ahead of the analyst consensus for a rise of 0.3%. Ahead of today’s release retails sales data had fallen short of expectations in the last five readings. Core retail sales also came out ahead with a rise of 0.5% versus an expected 0.3%.
Wednesday’s highlight will be the meeting minutes release from the latest Fed meeting. The statement that was released following the meeting indicated that the Fed intends to normalize the balance sheet soon and that policymakers took note of subdued inflation levels.
The main focus will be on inflation and if the minutes reveal whether the Fed is starting to shift its stance on monetary policy. The rate statement suggests the Federal Reserve remains on course and continues to view the recent inflation slump as a result of transitory factors.
Ahead of the Fed minutes at 14:00 EST, US building permits, and housing starts will be released at 08:30 EST.
In the near term, the first level of resistance is found at 1.0750 as the level held the pair higher following the NFP report near the start of the month and ahead of last week’s consumer price index data. A horizontal level at 1.1767 is the next level of interest to the upside and carries confluence with the 50% retracement of the decline from last week’s high to this week’s low.
Support at 1.1714 reflects the 2015 high. A sustained break targets the 2016 high at 1.1616.