Although the previous retail sales data was upwardly revised, the recent figures were well below the forecast. This resulted in further depreciation of the euro. Economists had expected a slower drop of 2.6% after a 2.8% decline in the previous period. However, the previous figures were revised to a decline of 2.6%. As a result, the indicator showed even a faster decrease of 2.8%. In other words, the situation aggravated instead of improving. If even the previous data was not revised, the result would have been negative. The fact is that retail sales reflect consumer activity, which is the main driver of the eurozone economy. A decline in retail sales excludes GDP growth. Thus, the eurozone will hardly avoid a recession. The indicator has been falling for seven months in a row. What is more, the pace of falling is accelerating. Under the current conditions, the ECB has nothing to do but loosen the monetary policy. In other words, there is no doubt that the European regulator will be the first to cut the key rate. This explains a decline in the euro. However, we should keep in mind that the US dollar is significantly overbought, which may spur a bounce. In fact, this could happen today amid an absolutely empty macroeconomic calendar.
Eurozone Retail Sales
The euro/dollar pair kept the inertial movement ignoring technical signals of the euro's oversold conditions. It also managed to settle below 1.0750. This action points to a correctional movement from the peak of the uptrend.
On the four-hour chart, the RSI technical indicator dropped below the control level of 30 for the first time since the year began. This reflects the oversold conditions of the euro. On the daily chart, the indicator is at the lowest level since November 2022, which corresponds to a slowdown in the upward cycle.
On the four-hour chart, the Alligator's MAs are headed downwards, which reflects the existing correctional movement. On the daily chart, the indicator is signaling a slowdown in the uptrend. This is confirmed by the intersection between the green and red MAs.
Outlook
In the last three days, the euro has lost about 300 pips. This is not typical for the currency market. Speculators are ignoring technical signals, which may boost the inertial movement. Against the backdrop, a decline is still possible. However, the mid-term trend is likely to remain intact. To cause a change in the market sentiment, the price should settle below 1.0500 on the daily chart.
However, the overheating of short positions on the euro may force traders to close them. This, in turn, may lead to a technical rebound.
In terms of the complex indicator analysis, we see that in the short-term and intraday periods, indicators are signaling sell opportunities amid the inertial movement. In the mid-term period, there are mixed signals because of the slackening in the uptrend.
