Fundamental Analysis:
1. US Retail Sales Increase: Recent data shows a 0.6% increase in retail sales in December, marking the strongest pace in three months. This indicates a solid holiday season and a resilient consumer attitude in the US, which could be a positive indicator for the US dollar (USD).
2. Consumer Resilience and Economic Outlook: Despite predictions of a recession, household spending has been surprisingly strong over the past year. However, this momentum is expected to slow down in 2024 due to persistent inflation, high borrowing costs, and diminishing savings. This could limit the strengthening of the USD.
3. Market Reaction: The immediate market response to the data was a drop in US Treasuries and stocks, suggesting a scaling back of expectations for Federal Reserve rate cuts. This generally would favor the dollar.
4. State of the US Economy: Manufacturing output showed minimal growth, indicating weakness in that sector.
Technical Analysis:
1. Monthly Time Frame: EUR/USD has rejected a key resistance, suggesting a possible bearish reversal.
2. Weekly Time Frame: The pair is in an upward trend and is at a significant support, which could indicate a bounce.
3. Daily Time Frame: There is an overextension of the price, suggesting a bearish correction towards 1.0800
4. 4-Hour Time Frame: A shift towards an upward trend is observed, confirming the possibility of a correction.
Conclusion and Strategy:
- Short-Term Outlook: The current strength of the dollar, supported by solid retail sales, could keep EUR/USD under pressure. However, the overextension and upward trend in shorter time frames suggest an imminent correction.
- Medium-Term Outlook: The expectation of an economic slowdown in the US in 2024 and potential weakness in the manufacturing sector could limit the long-term strengthening of the dollar.
1. US Retail Sales Increase: Recent data shows a 0.6% increase in retail sales in December, marking the strongest pace in three months. This indicates a solid holiday season and a resilient consumer attitude in the US, which could be a positive indicator for the US dollar (USD).
2. Consumer Resilience and Economic Outlook: Despite predictions of a recession, household spending has been surprisingly strong over the past year. However, this momentum is expected to slow down in 2024 due to persistent inflation, high borrowing costs, and diminishing savings. This could limit the strengthening of the USD.
3. Market Reaction: The immediate market response to the data was a drop in US Treasuries and stocks, suggesting a scaling back of expectations for Federal Reserve rate cuts. This generally would favor the dollar.
4. State of the US Economy: Manufacturing output showed minimal growth, indicating weakness in that sector.
Technical Analysis:
1. Monthly Time Frame: EUR/USD has rejected a key resistance, suggesting a possible bearish reversal.
2. Weekly Time Frame: The pair is in an upward trend and is at a significant support, which could indicate a bounce.
3. Daily Time Frame: There is an overextension of the price, suggesting a bearish correction towards 1.0800
4. 4-Hour Time Frame: A shift towards an upward trend is observed, confirming the possibility of a correction.
Conclusion and Strategy:
- Short-Term Outlook: The current strength of the dollar, supported by solid retail sales, could keep EUR/USD under pressure. However, the overextension and upward trend in shorter time frames suggest an imminent correction.
- Medium-Term Outlook: The expectation of an economic slowdown in the US in 2024 and potential weakness in the manufacturing sector could limit the long-term strengthening of the dollar.
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