– U.S. Advance Retail Sales to Increase for Eighth Time in 2014.
– Rise of 0.2% Would Mark the Smallest Rebound for Entire Year.
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Trading the News: U.S. Advance Retail Sales
Beyond the Euro-Zone’s 3Q Gross Domestic Product (GDP) report, a marked rebound in U.S. Retail Sales may continue to highlight a long-term bearish outlook for EUR/USD as the Federal Open Market Committee (FOMC) is widely expected to start normalizing monetary policy in 2015.
What’s Expected:
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Why Is This Event Important:
Indeed, a large pickup in private-sector consumption may foster a greater dissent within the FOMC and encourage a greater number of central bank officials to adopt a more hawkish tone for monetary policy as it raises the outlook for growth and inflation.
Expectations: Bullish Argument/Scenario
Release
Expected
Actual
U. of Michigan Confidence (OCT F)
86.4
86.9
Consumer Confidence (OCT)
87.0
94.5
Consumer Price Index Core (YoY) (SEP)
1.7%
1.7%
Discounted prices paired with the pickup in consumer confidence may generate a strong sales report, and positive developments coming out of the U.S. economy should continue to heighten the appeal of the greenback as it boosts interest rate expectations.
Risk: Bearish Argument/Scenario
Release
Expected
Actual
Non-Farm Payrolls (OCT)
235K
214K
Average Hourly Earnings (YoY) (OCT)
2.1%
2.0%
Personal Income (SEP)
0.3%
0.2%
However, U.S. household may continue to scale back on spending amid slowing employment along with subdued wage growth, and a dismal print may spur a more meaningful rebound in EUR/USD as Fed Chair Janet Yellen remains in no rush to remove the zero-interest rate policy (ZIRP).
How To Trade This Event Risk(Video)
Bullish USD Trade: U.S. Retail Sales Rebounds 0.2% or Greater
Need red, five-minute candle following the release to consider a short trade on EUR/USD
If market reaction favors a long dollar trade, sell EUR/USD 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: Private-Sector Consumption Continues to Disappoint
Need green, five-minute candle to favor a long EUR/USD trade
Implement same setup as the bullish dollar trade, just in the opposite direction
Potential Price Targets For The Release
Chart – Created Using FXCM Marketscope 2.0
Will continue to favor downside targets as RSI holds in oversold territory & retains bearish momentum.
Interim Resistance: 1.2600 pivot to 1.2620 (61.8% expansion)
Interim Support: 1.2280 (100% expansion) to 1.2300 pivot
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Impact that the U.S. Retail Sales report has had on EUR/USD during the previous month
Period
Data Released
Estimate
Actual
Pips Change
(1 Hour post event )
Pips Change
(End of Day post event)
SEP 2014
10/15/2014 12:30 GMT
-0.1%
-0.3%
+121
+146
September 2014 U.S. Advance Retail Sales
U.S. retail sales in September fell short of market expectation as it shrank 0.3% from August, largely due to drops in purchases of gasoline, autos, clothing and building materials. Despite the ongoing improvement in the labor market, stagnant wage gains may continue to hit household spending, which may further hinder the U.S. economy in the third quarter. The disappointing print dragged on the greenback, with the EUR/USD surging above the 1.2800 handle to end the day at 1.2815.
Read More:
Price & Time: The AUD/USD Cold Shoulder
AUDUSD Scalps Target Head and Shoulders Break- Bearish Sub 9236
— Written by David Song, Currency Analyst and Shuyang Ren
To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.
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Source: Daily fx