Woman walking in Washington, DC with the Washington monument seen in the background. Image source: ©Grandbrothers © 123RF.com
Consumption fell markedly in the U.S. on a month-over-month basis in February, following the considerable rebound that was recorded in January. According to the findings of the Census Bureau, retail sales contracted by 3.0 per cent last month, which missed the consensus forecasts anticipating a much more subdued correction of only 0.5 per cent.
The underlying performance represents a seesaw dive following the massive 7.6 per cent jump in sales that was recorded over the first month of the year.
U.S. Retail Sales. Image source: TradingEconomics.com
Even though this looks like a detrimental plunge for the retail sector, being the most significant contraction since the nearly 15 per cent dive that was observed in the wake of the coronavirus crash, the actual situation is not as stark as it seems.
The market seasonality factor should not be disregarded when examining these results because sales tend to contract in February. This is owing to the typically bolstered consumption in January, which is driven by huge discounts.
Retail sales in the U.S. are likely to continue leading the global trend in March and April, given Joe Biden's massive fiscal stimulus package. The "American Rescue Plan" is precisely intended to help citizens with stimulus checks in a bid to bolster consumption.
That is why the recuperating dollar was not affected severely by today's news. As can be seen on the hourly EURUSD chart below, the short-term bias continues to favour the bears.
However, the underlying price action appears to be developing a Triangle, which typically represents a trend continuation pattern. In other words, greenback bulls need to monitor the further behaviour of the price action carefully, as a potential breakout above the Triangle's upper boundary could imply reinstated bullish bias.
Meanwhile, the MACD indicator underpins rising bearish momentum in the short-term. If the EURUSD manages to retrace from the Triangle's upper boundary, which is currently converging with the 100-day MA (in blue) and the 50-day MA (in green), this will allow it to probe the major support at 1.19150 next.
A potentially decisive breakdown below the latter would substantiate the bearish expectations for the longer-term.
EURUSD 1H Price Chart. Image source: Trendsharks ©, created with TradingView.com
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