EURUSD moderately advances to 1.0370 after pulling back from 200 DMA

• Mixed US economic data prevented EURUSD from holding above 1.0400.
• The US Retail Sales report crushed expectations for further rate hikes from the Federal Reserve.
• According to Reuters, European Central Bank policymakers will raise rates by 50 basis points at their December meeting.
• If the EURUSD does not register a daily close above 1.0400, the fall towards 1.0200 would worsen.

The EURUSD it extends its gains for the second day in a row, but struggles to break above the 200 day EMA and pulls back. The release of an upbeat US retail sales report capped gains for the euro (EUR) as the major currency fell below 1.0400. At the time of writing, the EURUSD is trading at 1.0371, up 0.22% from its opening price.

Dollar bolstered by very positive US retail sales report

Sentiment remains negative, as evidenced by US stocks trading at a loss. A report from the US Department of Commerce showed resistance from consumers in the midst of one of the most aggressive tightening cycles of the Federal Reserve (Fed). Retail Sales for October increased 1.3% month-on-month, versus an estimated 1%, marking the biggest increase in eight months. As for the control group used for the calculations of the Gross Domestic Product (GDP), sales grew 0.7% month-on-month against a forecast of 0.3%.

Later, US Industrial Production plunged from 0.1% in September to -0.1%m/m, missing estimates for a 0.2% rise.

Following the reports, Federal Reserve officials expressed that inflation and higher rates are necessary. They added that a moderation in interest rate hikes could come soon, though they stressed that they have work to do. It should be noted that the president of the Kansas City Fed, Esther George, said in an interview with the Wall Street Journal (WSJ) that it would be difficult to lower inflation without causing a recession.

Meanwhile, the Atlanta Fed’s fourth-quarter GDP projection stands at 4.38%, up from its previous reading of 4%, an upbeat forecast for the US economy,

Members of the European Central Bank pledge to curb inflation

On the other side of the pond, the policy makers of the European Central Bank (ECB) made statements, led by Vice President Luis de Guindos, who affirmed that inflation is his main priority, while Ignacio Vizco added that the arguments for a rise of less aggressive types are increasing. Meanwhile, the report on the financial stability of the euro zone published by the ECB indicates that the risks for financial stability are increasing due to the worsening of economic and financial conditions, which is blamed on the energy crisis and the invasion of Ukraine by Russia.

Separately, ECB officials are reported to be in favor of a 50 basis point rate hike in December, up from 75 basis points, according to Reuters.

EURUSD Price Analysis: Technical Perspective

EURUSD is comfortably above the November 14 daily high at 1.0358, after having probed as high as 1.0400. Of note, the Euro rallied towards the 200 day EMA for the second time, but sellers outpaced buyers, sending the pair below the 1.0400 signal. Therefore, EURUSD traders should keep in mind that if EURUSD fails to make a daily close above 1.0400, it would compound the decline towards the 12th September high at 1.0197, followed by the 26th October swing high turned into support at 1.0088.