US retail sales for August were much stronger than expected, even with lower revisions from the July print. The headline impression was + 0.7% against an expectation of -0.8%. However, the number for July has been revised down from -1.1% to -1.8%, which corresponds to an impression of 0.0% for August (even better than expected). In addition, Retail sales (excluding Autos) came out at 1.8% against -0.1% expected. As with the overall figure, the July impression has been revised down to -1.0% from -0.4%, which corresponds to 1.2% for August (still much better than expected). This is good news for the US economy after the terrible impression in July.

As has been the case for much of the past 1 ½ years, good news means a stronger US dollar as it leads to stronger expectations that the FOMC will announce a cut at its meeting next week. The US dollar was already higher throughout the European session, and this continued after the retail sales data. Over a period of 240 minutes, the DXY traded above previous highs and appears to close the current bar above 92.80, which is the neck line for an inverted head and shoulders pattern (with 2 shoulders straight) and the 50% retracement level from August 20e peaks on September 3e low.

Source: Tradingview, Pierre X

The target for the inverted head and shoulders pattern is near August 20e highs of 93.72. However, if the price is to hit the target, it must first pass through the 61.8% Fibonacci retracement level from the previously mentioned period near 93.04, as well as the previous highs on August 27th. .e at 93.18. If the DXY falls back below 92.80, the price may fall back to the day’s low near 92.46. Below, horizontal support is at 92.31, then September 3e lower at 91.95.

As you would expect, with the big upward movement in DXY today, EUR / USD is on the way down. (The euro represents 57.6% of the DYX). Over the 240 minute period, EUR / USD broke through several important support levels today, including the 50% retracement and the 61.8% Fibonacci retracement of August 20.e low to September 3e Tops. If the pair is to continue falling around August 20e lower, it will have to go through the horizontal supports at 1.1727 and 1.1702 first. The RSI is approaching oversold levels and may be ready for an intraday rebound. The horizontal resistance above is at 1.1770 and 1.1804.

Source: Tradingview, Pierre X

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