The EUR/USD price declined for the fourth consecutive day even after the relatively strong economic data from Europe. The pair dropped to an intraday low of 1.2000, which was the lowest level since 1st December.
Strong EU retail sales
The Eurozone’s retail sales rebounded in December, helped by the robust holiday shopping. According to Eurostat, the volume of retail sales rose by 2.0% in December compared with the previous month. This increase was better than November’s decline of 5.7% and the median estimate of 1.6%.
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The sales were also better than those in December 2019. In total, the sales rose by 0.8% on an annualised basis after dropping by 2.2% in the previous month. The highest increase was in countries like Belgium, France,m and Ireland. Netherlands, Germany, and Denmark were the biggest laggards.
Therefore, the EUR/USD dropped possibly because recent numbers have been relatively weak because of the ongoing lockdowns. For example, the services PMIs dropped below 50 in January.
Also, the EUR/USD fell because of the relatively strong dollar. Indeed, the dollar has gained against all currencies in the dollar index. It has risen by 0.65%, 0.35%, and 0.22% against the Swedish krona, Swiss franc, and Canadian dollar.
Looking ahead, the pair will react to the important employment numbers from the United States set for tomorrow. In general, most economists believe that the economy added about 100k jobs in January while the unemployment rate remained at 6.7%.
Today, data by the Bureau of Labour Statistics showed that the number of people filing initial jobless claims declined to 830k last week. Continuing claims declined to 4.7 million while the unit labour cost increased by 4%.
EUR/USD technical outlook
On the daily chart, we see that the EUR/USD price has formed a head and shoulders (H&S) pattern. The head is at the YTD high of 1.2347 while the right and left shoulders are at 1.2177 while the neckline is at 1.2058. This pattern is usually a bearish signal. Also, the price is along the lower line of the Bollinger Bands.
Therefore, in the medium term, the pair will likely drop to 1.1758, which is the lowest level since November 11. This price is notable because it is slightly below the psychological level of 1.1800. Also, look at the distance from the neckline to the head and the neckline to this level.