US Monthly Retail Sales Overview

Friday's US economic docket highlights the release of monthly Retail Sales figures for March, due later during the early North American session at 12:30 GMT. The headline sales are expected to contract by 0.4% for the second straight month, while core sales, excluding automobiles, probably declined by 0.3% in March as compared to the 0.1% fall in the previous month. However, the downbeat expectations strengthen the case for an upside surprise.

According to Yohay Elam, Senior Analyst at FXStreet: “The relentless American consumer has a relatively low bar to pass, which may even be lower. The US retail sales report is highly important and will determine the closing moves of the week. I expect a small beat of the downbeat estimates, resulting in an ephemeral increase for the US Dollar, and an extension of the gradual gains in stocks.”

How Could It Affect EUR/USD?

Ahead of the key release, a modest US Dollar (USD) recovery from a one-year low keeps a lid on the EUR/USD pair's intraday uptick to the 1.1075 area, or the highest level since April 2022. A stronger US macro data could strengthen the USD further, though the immediate market reaction is likely to remain limited amid growing acceptance that the Federal Reserve (Fed) is nearing the end of its rate-hiking cycle.

Conversely, any disappointment from the US Retail Sales figures will reaffirm bets that the Fed will start cutting rates towards the end of the year, which should trigger a fresh leg down for the USD. This, in turn, suggests that the path of least resistance for the EUR/USD pair is to the upside and any meaningful pullback is more likely to attract fresh buyers at lower levels and remain limited.

Meanwhile, Eren Sengezer, Editor at FXStreet, offers a brief technical outlook and writes: “EUR/USD climbed out of the ascending regression channel and the Relative Strength Index (RSI) indicator on the four-hour chart rose toward 80, pointing to overbought conditions.”

Eren also outlines important technical levels to trade the EUR/USD pair“In case the pair stages a correction and returns within the ascending channel, 1.1020 (mid-point of the channel), 1.1000 (psychological level, static level) and 1.0970 (20-period Simple Moving Average (SMA)) align as support levels.”

“On the upside, 1.1100 (psychological level) aligns as the next bullish target ahead of 1.1150 (static level from March 2022),” Eren adds further.