EUR/USD shows us it’s vulnerable

Yet another disappointing retail sales report was not good enough: EUR/USD initially advanced, but this didn’t last too long.

While other currencies also failed to rally against the dollar, the euro shows that it is the weakest: falling fast and falling the hardest. While the pair is still in range, this reaction shows that it is vulnerable.

Retail sales are important in the US: consumption is the name of the game. While the miss on the control group wasn’t terrible, the overall picture wasn’t good, and also the reaction of bond markets, lowering the pricing of a rate hike in December shows that the reaction should have been more negative for the greenback.

Is it the unimpressive GDP figures? The euro-zone grew by only 0.3% instead of 0.4% expected, but year over year it grew 1.6%, better than 1.5% in the previous quarter and only 0.1% below 1.7% expected. Not a disaster. And Germany, the biggest country, grew 0.3% expected.

It seems that the euro is weak due to more conviction not about the Fed but about the ECB: Draghi’s words may be taking a deeper hold and perhaps the consolidation phase is nearing an end.

Will EUR/USD dive to lower ground? The immediate test is US consumer confidence, but yet another Draghi drag on Monday as well as more data and more time that passes towards the December decision could push the pair lower, with 1.0460 not too far.

Here is the chart of EUR/USD on Friday the 13th:

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