Earlier today, the Census Bureau in the US delivered the Retail Sales data for August, which missed the market expectations. The consensus forecasts were anticipating retail sales to have risen by 0.2 percentage points from a month prior to 1.1 per cent.
Instead, the Census Bureau revealed that due to dampened consumer spending at the height of the summer holidays period, retail sales have plunged to 0.6 per cent.
The fall in consumer activity can be attributed to the fact that many people have decided to go on vacations as government COVID-19 restrictions eased significantly after a long stretch of stringent epidemic measures.
Moreover, a notable drop in energy prices had an adverse impact on the US retail sector. The market, however, did not react very drastically to the news, as retail sales have, for the most part, converged towards the recorded pre-crash levels.
There is an additional factor in play, which the market expects to strengthen retail sales in the near future. The robust recovery of the labour market is likely to lead to more earnings for American workers, which, in turn, should result in increased consumer spending.
The recent rally of the dollar therefore continues unimpeded by today's news. As can be seen on the hourly chart below, the EURUSD is currently developing a new downswing.
The price action was unable to break out above the psychologically significant resistance level at 1.19000, which subsequently led to bolstered bearish bias in the market.
The price action subsequently established a new swing high, which is positioned considerably below the preceding one, which represents another selling signal for bears.
At present, the price action is concentrated below the 10-day MA (in red), which, in turn, is positioned below the 30-day MA (in green). The latter is lower than the 50-day MA (in blue), and this descending order gives more prominence to the expectations for continued falling.
If the price action manages to break down below the major resistance level at 1.18200 decisively, this will represent a significant piece of evidence that the market is ready to resume probing further down south.