– U.S. Advance Retail Sales to Rise for Fourth Straight Month
– Fed to Highlight Resilience in Private Consumption
Trading the News: U.S. Advance Retail Sales
The U.S. Advance Retail Sales report may encourage a more meaningful rebound in the dollar as private sector consumption is expected to increase at a faster pace in August.
What’s Expected:
Time of release: 09/13/2013 12:30 GMT, 8:30 EDT
Primary Pair Impact: EURUSD
Expected: 0.5%
Previous: 0.2%
DailyFX Forecast:0.2% to 0.6%
Why Is This Event Important:
With the Federal Open Market Committee (FOMC) interest rate decision on tap for next week, fundamental developments highlighting a stronger recovery may spur a more meaningful U.S. dollar rebound going into the central bank meeting, and a material shift in the policy outlook may generate a rally in the reserve currency as the Fed slowly moves away from its easing cycle.
Expectations: Bullish Argument/Scenario
Release
Expected
Actual
Average Weekly Earnings (YoY) (AUG)
2.1%
2.2%
Consumer Confidence (AUG)
79.0
81.5
Domestic Vehicle Sales (AUG)
12.30M
12.44M
The pickup in wage growth along with the ongoing rebound in household sentiment may encourage a strong retail sales report, and a positive print may spark a near-term rally in the USD as the world’s largest economy gets on a more sustainable path.
Risk: Bearish Argument/Scenario
Release
Expected
Actual
Change in Non-Farm Payrolls (AUG)
180K
169K
Consumer Credit (JUL)
$12.700B
$10.437B
Challenger Job Cuts (YoY) (AUG)
—
56.5%
Nevertheless, the ongoing weakness in the labor market paired with the slowdown in private sector credit may weigh on consumption, and a dismal sales report may fuel the decline from earlier this month as market participants scale back bets of seeing a less-dovish FOMC.
How To Trade This Event Risk(Video)
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Bullish USD Trade: Retail Sales Climbs 0.5% or greater
Need red, five-minute candle following the data to consider a short EURUSD trade
If market reaction favors a short trade, sell EURUSD with two separate position
Set stop at the near-by swing high/reasonable distance from entry; look for at least 1:1 risk-to-reward
Move stop to entry on remaining position once initial target is hit, set reasonable limit
Bearish USD Trade: Household Spending Disappoints
Need green, five-minute candle to favor a long EURUSD trade
Implement same setup as the bearish dollar trade, just in reverse
Potential Price Targets For The Rate Decision
EURUSD Daily
Chart – Created Using FXCM Marketscope 2.0
Carves lower high ahead of FOMC meeting; Bearish RSI divergence
Interim Resistance: 1.314 (61.8% Fib retracement)
Interim Support: 1.3220-30 (50.0% retracement) & 1.3110-20 (38.2% retracement)
Impact that the U.S. Advance Retail Sales report has had on USD during the last release
Period
Data Released
Estimate
Actual
Pips Change
(1 Hour post event )
Pips Change
(End of Day post event)
JUL 2013
08/13/2013 8:30 GMT
0.3%
0.2%
-42
-30
July 2013 U.S. Advance Retail Sales
Household spending increased another 0.2% in July following the 0.6% advance the month prior, which was largely driven by higher gasoline receipts along with a pickup in discretionary spending. Despite the weaker-than-expected print, the resilience in private sector consumption, propped up the dollar, with the EURUSD slipping back below the 1.3250 region, but we saw the reserve currency consolidate during the North American trade as the pair ended the day at 1.3260.
— Written by David Song, Currency Analyst
To contact David, e-mail dsong@dailyfx.com
Follow me on Twitter at @DavidJSong
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Source: Daily fx
