EUR/USD drops on weak Eurozone retail sales miss expectations

EUR/USD declined 0.2% to 1.0420 following disappointing Eurozone retail sales data that significantly missed market expectations. December retail sales fell 0.5% month-over-month, well below the anticipated -0.2% decline and reversing November's revised +0.1% gain. Year-over-year growth slowed to 1.3% from 2.4%, missing the 1.6% forecast. Despite the weak December finish, annual 2025 retail trade volume is projected to increase 2.3% compared to 2024, suggesting underlying consumer resilience. The data reinforces concerns about Eurozone economic momentum heading into 2026, potentially limiting ECB's ability to tighten policy. Technical indicators show EUR/USD testing support at 1.0400, with resistance at 1.0450. A break below 1.0400 could accelerate losses toward 1.0380, while any recovery faces headwinds from diverging EU-US economic growth trajectories.