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The U.S. Retail Sales Report May Validate Bearish Dollar Technical Outlook

Thursday, 12 February 2009 04:40:11 GMT  |  John Rivera, Currency Analyst

The U.S. retail sales report is expected to show that consumer spending declined by 0.8% in January after a 2.7% drop the month prior. It would mark the seventh straight monthly decline as consumers have continued to retrench as companies continue to slash jobs.

Fundamental Outlook

The U.S. retail sales report is expected to show that consumer spending declined by 0.8% in January after a 2.7% drop the month prior. It would mark the seventh straight monthly decline as consumers have continued to retrench as companies continue to slash jobs. However, we could see a surprise to the upside considering that gasoline prices have stabilized which could lead to a significant rebound in gas station sales which declined 15.9% in December. No that it appears that the “Obama Stimulus” is going to be passed; the outlook for consumer spending may increase with the expected tax cuts. Therefore, a mild decline in consumption in January could spark risk appetite which could weigh on the dollar. This would validate that bearish dollar technical outlook which is calling for the EUR/USD to test resistance at 1.3430. However, a dismal reading could reignite recent growth fears and add to dollar strength.

 

Technical Outlook

The EURUSD has been confined to a 1.28-1.31 range so far this week.  I still expect that the break will be higher for a few reasons.  For one, the decline from 1.47 is in 5 waves.  This does strongly argue that the larger trend is still down but a corrective rally is expected prior to the next leg lower.  Chart resistance does not begin until 1.33 and Fibonacci resistance does not begin until 1.3430.  1.2704 needs to remain intact to keep this forecast on track.  Near term, the series of higher highs and higher lows since 1.27 is bullish.  Short term support is below 1.29. 

 

For More Technical Analysis Visit the Daily Technical Report

 

Related Articles:

EUR/USD: Trading the U.S. Advance Retail Sales Report

 

To discuss this report contact John Rivera, Currency Analyst: jrivera@fxcm.com

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