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US retail sales preview: What to expect of EUR/USD?

FXStreet (Mumbai) - The EUR/USD pair has taken out the hourly 50-MA resistance amid sell-off in oil and weak European stock market and is eyeing 1.10 levels, heading into the US November advance retail sales report.

Expectations are high

Expectations are high for November retail sales. The headline figure is seen rising 0.3% m/m from Oct’s 0.1%. Retail sales ex-Autos is seen rising 0.3% from Oct’s 0.2%. The control group retail sales number is expected to show a much stronger jump of 0.4%.

The headline figure could disappoint, since autos form a 1/5th of the total number. However, the auto sales had dipped in November. Most experts also say the Black Friday sales were not significantly strong as well.

Control group number may save the day

Control group sales - which exclude gas, autos, food and home improvement supplies - are faring a bit better since last couple of months and may match estimates today. Last month too, the figure was upbeat and provided support to the US dollar.

Fed liftoff - 25bps or less than 25bps?

A weak data is unlikely to deter the Fed from hiking rates next week. Markets are convinced that the liftoff would happen, but the size of the first move could be influenced by the retail sales figure. The probability of a conventional 25bps move would drop if the retail sales number is horribly weak. This may lead to USD weakness ahead of the weekend.

EUR/USD Technical Levels

The pair currently hovers around 1.0969 (hourly 50-MA). The immediate hurdle is seen at 1.10-1.1006 (50% of 1.1495-1.0517) ahead of the MA resistance at 1.1030 (200-DMA) and 1.1060 (100-DMA). A break higher would expose 1.1087 (Sep 3 low). On the other hand, a break below 1.0948 (50-DMA) would expose 1.0890 (38.2% of 1.1495-1.0517), which, if taken out shall expose 1.0808 (July 20 low).

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