Forex News: Euro Drops Below 1.31 on Disappointing Retail Sales

THE TAKEAWAY: Euro-zone retail sales decline 1.2% in October, worse than expected -> Lower sales possibly suggest a contraction in Q4 economy -> Euro falls below 1.3100

Euro-zone retail sales decline by the sharpest rate in 6-months in October. Sales were down 1.2%, worse than the expected 0.2% drop in retail sales, and lower than September’s revised 0.6% decline. Retail sales declined by 3.6% when compared to October 2011, according to Eurostat.

The sales of food, drinks, and tobacco declined by 0.8% in October; non-food sales declined by 1.4%. Finland saw the largest decline in retail sales, down 3.0%, and Germany saw a 2.8% decline in sales. Ireland saw the biggest increase in retail sales, up 1.9%.

The Euro-zone entered a technical recession when the economy contracted for two straight quarters. Euro investors are looking for signs of a return to growth in Q4, and between the lower retail sales and today’s report of the 10th straight month of declining composite output, it seems like there is a smaller chance of returning to growth.

The Euro declined following the release of the disappointing retail sales, EURUSD is trading back below 1.3100 in forex markets. Resistance could be provided by a 2-month high at 1.3139, and support could be provided at 1.3026, by the 76.4% retracement of the drop from October’s high to November’s low.

EURUSD Daily: December 5, 2012

Euro_Drops_Below_1.31_on_Disappointing_Retail_Sales_body_eurusd_daily_chart.png, Forex News: Euro Drops Below 1.31 on Disappointing Retail Sales

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