The disappointing statistics on US retail sales for December only temporarily stopped the bears in EUR / USD. The US economy slows down to 2% in the fourth quarter, according to JP Morgan. The Fed does not begin to raise the federal funds rate in 2019, as the derivatives market shows, but the eurozone looks so gloomy that it's fit to talk about reanimation QE. Against this background, the fall of the euro to 3-month lows against the US dollar looks logical. The main thing is that sellers do not overdo it.

In the fourth quarter, German GDP almost fell into a technical recession, while European GDP grew by a modest 0.2% q / q. The problems of German industry, weak domestic and external demand are forcing the economy of the currency bloc to slow down. Many of the difficulties are most likely temporary. If the trade wars stop, then the export of the Old World will be able to rise from its knees, but who can guarantee that this will happen? That having dealt with China, Donald Trump will not take up the EU by increasing duties on European cars? But there is also Brexit and the related gap in economic ties with an important trading partner. Italy with its eurosceptics. The euro looks so weak that it is unable to resist even the deprived of the main trumps of the US dollar.

The "American" no longer expects aggressive monetary restriction and 3% GDP growth. About half of the hundreds of Reuters experts predict that the Fed has completed a cycle of tightening monetary policy, the rest believe that the central bank will raise the rate only once. Derivatives market gives only 2% probability of such an outcome. For comparison, the chances of lowering the rate are estimated at 12.5%. At the same time, statistics on the States, with the exception, perhaps, of retail sales, does not disappoint at all, and the divergence in the dynamics of economic surprise indexes creates a solid foundation for the downward trend in EUR / USD.

Dynamics of US economic indexes and eurozone surprises

Obviously, against the background of decent data, the fall in the probability of the Fed normalization cycle continuing is entirely connected with the "pigeon" rhetoric of its representatives. In this regard, the publication of the minutes of the January meeting of the FOMC seems to be a test for the US dollar. However, the euro will have to go through the fire and copper pipes: a day later, on February 21, the statistics on business activity and the minutes of the meeting of the Governing Council will be released. I recall that during the press conference on its results, Mario Draghi spoke about the LTRO, which was the reason for the sales of the euro.

Equally important are the results of trade negotiations between the United States and China. Should the conflict escalate, capital flight to safe havens will accelerate the fall of EUR / USD. Only the presence of a breakthrough will allow the bulls to go to the counter.

Technically, bears on the main currency pair are making titanic efforts to bring quotes outside the trading range of 1.1265-1.1485. If they succeed, the risks of target realization by 127.2% on the "Butterfly" pattern will increase.

EUR / USD, the daily chart