Can the upcoming retail sales data stop the US dollar decline for this week?

The US dollar has been trading lower against most of the major currencies for the past few days. The Euro has been the best performer of this week. The pair has successfully registered a consecutive six-day rise. Yesterday, the pair cleared the critical 1.3780/90 level, and traded as high as 1.3809. There was no high-risk event scheduled for the US until today. Today, the US retail sales data, import price index, initial jobless claims business inventories data and Bloomberg consumer confidence is scheduled to be released.

We are getting closer to the most important event of the month, the FOMC meeting. So, every data will be monitored and weighed very closely. After the better than expected NFP and unemployment data, the market is not taking the upcoming FOMC meeting very lightly. The US unemployment rate released this past week registered an impressive decline to 7.0%. Initially, at this level, the Fed was expected to stop the QE, until they revised it lower to 6.5%. The NFP also registered a gain of over 200K jobs in November, which is another positive.

Today, the US retail sales are expected to register a gain of 0.6% in November, up from 0.4%. The core retail sales are expected to remain unchanged from the previous month with a gain of 0.2%. Last time the retail sales jumped higher towards the 0.4%, despite the US shut down, as shown in the figure below. The market was not expecting such a strong gain in October, and was surprised by the outcome. There is no doubt that the recovery is strong, and many economists failed to gauge the recovery signs. This time there are expectations of further gains in the retail sector, which if turns out true, then may help the US dollar in the short term.

Along with the retail sales data, the US initial jobless claims will also be released. The US jobless claims have been declining from the past few weeks, as can be seen in the chart shown below. Last time the jobless claims fell sharply from 321K to 298K. This was an impressive decline, which surprised many people. This time the market is expecting the claims to rise again close to 320K. If the claims remain at around the 210K level, then it will be considered as a positive sign.

Later at GMT 02.45 PM, Bloomberg consumer confidence is scheduled to be released. The Bloomberg consumer confidence is also on the rise from the -37.9, as can be seen in the figure below. Let’s see whether there will be another rise this time or not.

Later at GMT 03.00 PM, the US business inventories data will be released. Surprisingly, business inventories are on the rise since September, and missing the expectation of decline each time as shown in the figure below. This time also the market is expecting a decline from 0.6% to 0.3%. If the outcome is around the expectations, then it might be positive for the US dollar.

Technically, there is a trend line, as plotted on the 4 hour chart for the EURUSD. The pair is testing the same trend line, and if the pair manages to break higher, then next possible resistance for the pair is at around the 1.3830 level, which also represents the 2013 high. On the downside, the support lies at around the 1.3740 and 1.3660 levels, as highlighted in the chart. The RSI is at the extreme levels, which is an early sign of exhaustion. ECB President Draghi will be speaking early in the morning, which can cause some moves for the Euro pairs. Let’s wait and see whether the pair can climb higher or retrace lower.

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