EUR/USD fell for a third day on Thursday, down 0.22% in North American trading. It traded at 1.1679 after reaching 1.1721.
US Retail Sales rose 0.5% month on month in April, versus 1.6% in March. Sales rose 4.9% year on year, above the 3.3% estimate.
Initial Jobless Claims for the week ending 9 May rose to 211K, above the 205K forecast. Gasoline station receipts rose 2.8% after a 13.7% rise in March.
US EIA data showed gasoline prices rose 12.3% last month. The US Dollar Index rose 0.33% to 98.77, a ten-day high.
Kansas City Fed’s Jeffrey Schmid said inflation is the most pressing risk to the US economy. He also said the economy has shown resilience and the job market is functioning effectively.
Market pricing implies no chance of a Fed rate cut in 2026. In Spain, April inflation was 3.2% year on year, down from 3.4% in March.
Next data includes Italy inflation, plus the New York Empire State Manufacturing Index and US Industrial Production. On charts, EUR/USD trades near 1.1676, with support near 1.1647 and resistance around 1.1759 and 1.1796.
Given the strong US retail sales and stubbornly high inflation, we see the Federal Reserve holding interest rates steady for the foreseeable future. The money markets are right to price out any chance of a rate cut in 2026. This policy stance keeps the US Dollar attractive, especially against currencies like the Euro.
The latest US Consumer Price Index data confirms this view, with inflation for April 2026 coming in at a persistent 3.4% year-over-year. Paired with a robust labor market that added 175,000 jobs last month, the American economy shows no signs of needing stimulus. This fundamental strength should continue to support the dollar in the coming weeks.
Conversely, the situation in Europe is quite different, creating a clear policy divergence. With inflation in Spain and the broader Eurozone falling faster—now hovering around 2.4% annually—the European Central Bank has more room to consider cutting rates. This growing gap between the Fed’s hawkish stance and the ECB’s potential dovish turn puts sustained downward pressure on the EUR/USD pair.
For derivative traders, this points toward strategies that profit from a falling EUR/USD. Buying put options on the Euro provides a direct way to bet on its decline while capping potential losses to the premium paid. We could see the pair test the 1.1647 support level soon, and a break below that could open the door to a deeper slide toward the 1.1500 psychological mark.
Shorting EUR/USD futures is another direct approach for those with a higher risk tolerance. This strategy benefits directly from each downward move in the exchange rate. Looking back at how the pair reacted in 2025 when similar economic divergences appeared, we saw consistent, multi-week trends develop that rewarded traders who positioned for dollar strength early.
