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US Monthly Retail Sales Overview

Tuesday’s US economic docket highlights the release of monthly Retail Sales figures for April, scheduled later during the early North American session at 12:30 GMT. The headline sales are estimated to have risen by a seasonally adjusted 0.7% during the reported month as against the 0.5% growth recorded in March. Excluding autos, core retail sales probably climbed by 0.3% in April, down sharply from the 1.1% increase reported in the previous month.

Analysts at Commerzbank offered a brief preview of the report and explained: “Retail sales are likely to have risen by 0.8% in April from March even as the decline in the price of gasoline depressed sales by half a percentage point. In contrast, we expect a strong increase in new car purchases based on data from auto manufacturers. Overall, such an increase in retail sales would be encouraging, as the days when consumers mainly bought goods and consumed fewer services (of which only restaurant sales are included in retail sales) because of the pandemic are now over. Instead, the consumption profile is slowly returning to normal, for example, because consumers are traveling more frequently again.”

How Could it Affect EUR/USD?

Ahead of the key release, the risk-on impulse dragged the safe-haven US dollar further away from a two-decade high and pushed the EUR/USD pair back above the 1.0500 psychological mark on Tuesday. A weak sales number would fuel concerns about softening US economic growth and exert additional downward pressure.

Conversely, stronger readings might do little to impress the USD bulls as the markets already seem to have fully priced in at least a 50 bps Fed rate hike move over the next two meetings. This, in turn, suggests that the path of least resistance for the EUR/USD pair is to the upside, though the immediate market reaction is likely to be short-lived ahead of Fed Chair Jerome Powell’s appearance.

According to Elwin Lobo, Editor Signals Factory “The Relative Strength Index (RSI) indicator on the four-hour chart stays below 70 while holding above 50, suggesting that the pair has more room on the upside before turning technically overbought.”

Elwin also outlined important technical levels to trade the EUR/USD pair: “On the upside, 1.0480 (50-period SMA, Fibonacci 50% retracement of the latest decline) aligns as initial resistance. In case this level turns into support, 1.0500 (psychological level, Fibonacci 61.8% retracement) and 1.0530 (100-period SMA) could be seen as the next recovery targets.”

“Supports are located at 1.0450 (Fibonacci 38.2% retracement), 1.0420 (Fibonacci 23.6% retracement) and 1.0400 (psychological level),” Elwin added further.

About US Retail Sales

The Retail Sales released by the US Census Bureau measures the total receipts of retail stores. Monthly per cent changes reflect the rate of changes in such sales. Changes in Retail Sales are widely followed as an indicator of consumer spending. Generally speaking, a high reading is seen as positive (or bullish) for the USD, while a low reading is seen as negative (or bearish).