Chart of the day - EURUSD (17.01.2024)

EURUSD may experience increased volatility today after investors learn more macro readings from the US, in the afternoon. Attention will focus mainly on retail sales and industrial production, however both readings likely to bring mixed signals. Also in the evening, a leading currency traders will be awaiting the release of the so-called Beige Book from the U.S. Fed, whose publication takes place 8 times a year. 

1:30 PM GMT - USA, Retail sales m/m. Expected: 0.4% Previously: 0,3%

• Core sales m/m. Expected: 0.2% Previously: 0,2%

2:15 PM GMT - USA, Industrial production m/m. Expected: -0.1% Previously: -0.2%

3 PM GMT - USA, NAHB Index Expected: 39 Previously: 37

7 PM GMT - USA, Fed Beige Book 

The market expects US retail sales growth to accelerate slightly on a monthly basis. Such a scenario seems positive for the dollar and could put stronger pressure on the euro. Waller's statements yesterday also suggested that the Fed will not rush to cut rates, and that their scale in 2024 could be as much as half as the market expects. At the same time, the IMF estimates that about three-quarters of the rate hikes so far have already been reflected in the US economy and didn't bring the economy to a recession (very strong GDP growth), at a time when the transmission of tightening in the Eurozone is about .50%, and Europe's economy has already serious headwinds. ECB chief Lagarde indicated today that rates have already peaked, and policy easing could begin before the summer of 2024 arrives. This seems a rather hasty timeline, given that the ECB, with a considerable delay to the Fed, has started raising rates. All the more reason to give investors further arguments that the ECB's inflation-fighting position will be softened given the more fragile economy.

The strength of the U.S. consumer and a tight labor market continue to hold sway across the Atlantic at a time when European economies are experiencing a slowdown. Also, hopes for cuts this year look more or less similar for Europe and the US, giving no special bonus to EUR holders from this side. As a result, investors may overweight the dollar against the euro and lead to further declines on the EURUSD pair. The Beige Book may shed more light on regional indicators from different regions of the US, and investors will have the opportunity to consider whether the slowdown seen in New York manufacturing (NY Empire State weakest since 2020) will also be confirmed outside the US East Coast.

EURUSD chart (D1)

Looking at the chart of the Eurodollar, we see that selling volume has recently started to strongly prevail again, resulting in further declines and a forming RGR structure. A fall below the 23.6 Fibonacci retracement (1.0865) of the upward wave from the fall of 2022 could lead to a test of the trend in the form of the SMA200 average, at 1.082. A potential slide below it could take EURUSD even to the area of 1.06. On the other hand, a rebound above 1.10 could negate the strong, downward momentum.

Source: xStation5