FOREX Watch: EUR/USD continues lower on US retail sales
The EURUSD plunged for a third consecutive day on deepening US recovery ahead of the September FOMC policy meetings. US retail sales for July advanced another 0.2 percent, slightly missing expectations for 0.3 percent, but still registering a fourth consecutive month of growth. Retail sales excluding autos advanced 0.5 percent for July, compared to expectations for 0.4 percent. Retail sales figures are excellent indicators of consumer spending. As economic growth in the US deepens, support for a Federal Reserve bond taper will intensify ahead of the September FOMC policy meetings.
The EURUSD fell to a low of 1.3238 in Tuesday’s North American session before consolidating at 1.3258 just after 12:00 AM GMT. The pair lost close to one percent over the past week, as signs of a fragile Eurozone emerge. The pair was relatively unaffected by Tuesday’s better-than-forecasted ZEW Survey results. The ZEW Survey, which measures institutional investor sentiment in Germany and the Eurozone, showed an overall reading of 42.0 for Germany and 44.0 for the Eurozone.
Aside from Germany’s robust performance the past few weeks, the euro is weighed down by the prospect of another Greece bailout. Germany’s Der Spiegel recently reported the Bundesbank believes international creditors will have to decide on the feasibility of another Greece bailout as early as 2014. Greece’s ongoing fiscal woes promise to weigh heavily on Germany’s upcoming general elections. The prospect of another Greece bailout has the potential to wreak havoc on an otherwise resilient euro, which has benefited from global volatility, especially from Japan.
The trend index points to a slightly bearish outlook for EUR/USD. The pair is likely to remain capped under the 1.3291 resistance until the United States reports on its July Consumer Price Index, which is slated for Thursday. A breach of this line would expose 1.3324. On the downside, the pair is supported at 1.3207 and 1.3174.
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