The EURUSD was already gaining bearish momentum even prior to the release of today's data, which catalysed this rising selling pressure. Read more about the underlying market sentiment on the most popular currency pair from our detailed analysis.
As can be seen on the hourly chart above, the price action had recently broken down below the major Distribution range (spanning between the 23.6 per cent Fibonacci retracement level and the resistance at 1.21500), as postulated by the Wyckoff method. This underscores the prevailing bearish sentiment in the longer term.
A minor bullish pullback was subsequently initiated from the 61.8 per cent Fibonacci retracement at 1.20924. It peaked just below the support-turned-resistance at 1.21500. This is significant for a number of reasons.
Firstly, a throwback to the lower end of the Distribution from below signifies the likelihood of a new major downtrend developing next. Secondly, the bullish pullback is taking the form of a Dead Cat Bounce, which is a type of pattern that typically entails such reversals.
Finally, the peak of the pullback also occurred below the 100-day MA (in blue), which presently serves as a floating resistance. All of this amounts to a confluence of bearish signals. The MACD indicator, too, recorded a bearish crossover in the underlying momentum recently.
If the price action manages to penetrate below the 61.8 per cent Fibonacci on the second attempt, this will clear the way for a deeper correction. Potentially towards the major support level at 1.20500.
According to the Census Bureau, retail sales fell by 1.3 per cent in May. The preliminary forecasts were anticipating a much smaller contraction of 0.6 per cent. This is a major downturn from a month prior, when the index remained flat at 0.0 per cent.
Yet, there is a silver lining in these results. It means that FED's longer-term projections for a break in inflation growth are getting fulfilled. This comes just hours before FOMC's highly anticipated June meeting and is likely to ease investors' tensions further.
The biggest winner from this is the greenback, which continues to stabilise in the short term.