• US sales only increased by 0.1% in May compared to expectations of a 0.3% increase.
• Markets are pricing in a 67% chance of a Fed cut in September.
• Economists expect the ECB to cut rates twice more this year.

The EUR/USD price analysis shows a slow rebound as the dollar remains fragile after weaker-than-expected retail sales figures. Meanwhile, the euro remained vulnerable amid political uncertainty and policy divergence between the ECB and the Fed.

The greenback fell on Tuesday after US retail sales data showed weaker-than-expected consumer spending in May. Sales only increased by 0.1% in May compared to expectations of a 0.3% increase. Moreover, data for the previous month was revised from a reading of 0.0% to -0.2%, indicating a slowdown in the economy.

Markets are pricing in a 67% chance that the Fed will lower borrowing costs in September. Furthermore, they expect at least 50 basis points of rate cuts from the Fed this year.

However, policymakers have maintained a different view, projecting only one cut in December. This hawkish outlook has helped keep the dollar strong despite poor economic data. Moreover, it has raised the chances of a policy divergence with the European Central Bank.

According to a Reuters poll, economists expect the ECB to cut rates twice more this year, in September and December. However, they also caution that there is a higher risk of fewer cuts. Policymakers have grown more cautious, with Philip Lane noting there was no urgency to cut rates if the economy remains robust. Meanwhile, Lagarde said the central bank will depend on economic data for future policy decisions.

At the same time, investors continued to worry about the situation in France after the snap election announcement.

EUR/USD key events today

Investors do not expect any key events from the US or the Eurozone today. Consequently, the price might consolidate.

EUR/USD technical price analysis: Decline pauses as bulls challenge the 30-SMA

On the technical side, the EUR/USD price has risen above the 1.0725 level to retest the 30-SMA resistance. Despite this bullish move, the bias remains bearish as the price makes lower highs and lows. Furthermore, it trades in a bearish channel and currently sits nearer the channel resistance.

Therefore, there is a chance that the bullish move will continue past the SMA to retest the channel resistance before bouncing lower. A continuation of the downtrend will allow bears to retest the 1.0650 level.

https://www.forexcrunch.com/blog/2024/06/19/eur-usd-price-analysis-weak-retail-sales-weigh-on-dollar/