With its recent dip in the Forex market, the US Dollar has been steadily holding its ground and bides time ahead of the critical US Retail Sales Data. Despite a strong US Dollar on a number of economic fronts including the US Economic Report (EIR), Consumer Spending Index, and Economic Confidence Indicators, the USD is holding its ground as a constant support for the EUR/USD and the EUR/CHF.
It is important to note that the US Dollar is not the only factor to consider when gauging the strength of a currency pair. The EUR/USD is also showing a steady support level above the previous high seen in early August. The EUR/USD is showing strength on these economic data but it has also maintained the current level of support around $1.4.
The EUR/USD is currently moving sideways and may be following a similar path as the Swiss Franc, which had started strengthening on the last two weekends prior to the European Central Bank’s meeting. With the EUR/USD looking like it is about to break out of the current range, traders will need to start anticipating the EUR/USD to strengthen even further. Traders may also want to pay close attention to the European Central Bank’s statement due to be released on Friday. If the EUR/USD weakens, traders may find themselves in a similar scenario with the EUR/CHF and the USD strengthening.
Although the EUR/USD may continue to weaken, the US Dollar remains strong and has recently held its value against the EUR/USD and its major counterparts the USD and the Euro. Despite the recent dip in the USD against the EUR and its major peers, the EUR/USD still remains solid and may be supported by the US Dollar.
The European Central Bank’s statement will provide some insight into the upcoming monetary policy decisions which are expected to come from the Bank of England and the Federal Reserve. Investors who have been watching the US economy will be closely watching the actions coming from the major central banks with interest rates expected to rise at some point in the near future.
This is very encouraging news for any investor as retail sales data may be a key catalyst for further improvement in the economy. However, if the unemployment rate continues to move above the level of 8%, the US Dollar may weaken further.
For now, the US Dollar has remained strong and it will likely continue to hold its value until the US Retail Sales Data for August is released during the second week of August. In the mean time, investors can look to the EUR/USD as an alternative support level as it holds a constant support level above the level of $1.4 and may provide support if the EUR/USD breaks out of the current range. This supports the EUR/USD if the US Dollar weakens and trades off a support line set by the EUR/JPY or the EUR/CHF.
There is a high probability of a breakout in the EUR/USD as the EUR/USD may break out of the recent support levels around $1.50 during the second week of August but traders must not expect the US Dollar to break out of the current range. Instead, they may want to watch the EUR/USD trade up to $1.60 as the breakout may lead to the break out of the current range. However, this would not be a good sign for a breakout to occur as the EUR/USD may continue to hold its current support level until September and the US Retail Sales Data for August is released.