Trading the News: U.S. Consumer Confidence
U.S. Consumer Confidence is expected to narrow for the second month in August and a marked downturn may produce a spark a selloff in the U.S. dollar as it raises the Fed’s scope to maintain its highly accommodative policy stance over the near to medium-term.
What’s Expected:
Time of release: 08/27/2012 14:00 GMT, 10:00 EDT
Primary Pair Impact: EURUSD
Expected: 79.0
Previous: 80.3
DailyFX Forecast: 78.0 to 82.0
Why Is This Event Important:
Another drop in household confidence may dampens bets of seeing the FOMC taper its $85 asset-purchase program at the September 17-18 meeting, and the central bank continue to delay its exit strategy in an effort to encourage a stronger recovery.
Expectations: Bearish Argument/Scenario
Release
Expected
Actual
Durable Goods Orders (JUL)
-4.0%
-7.3%
Advance Retail Sales (MoM) (JUL)
0.3%
0.2%
Average Hourly Earnings (YoY) (JUL)
2.2%
1.9%
The slowdown in private sector consumption could be indicative of a further slowdown in household sentiment, and a dismal print is likely to drag on the USD as it dampens the outlook for growth and inflation.
Risk: Bullish Argument/Scenario
Release
Expected
Actual
House Price Index (MoM) (JUN)
0.6%
0.7%
Existing Home Sales (MoM) (JUL)
1.4%
6.5%
Quarterly Gross Domestic Product (Annualized) (2Q A)
1.0%
1.7%
Nevertheless, the more broad-based recovery in the housing market may help to prop up consumer confidence, and an unexpected uptick in the Conference Board’s survey may produce a more meaningful rebound in the reserve currency amid the growing discussion at the Fed to scale back on quantitative easing.
How To Trade This Event Risk(Video)
Bearish USD Trade: Consumer Confidence narrows to 79.0 or lower
Need green, five-minute candle after the report to consider a long EURUSD trade
If the market reaction favors a buy trade, establish long with two position
Place stop at the near-by swing low/reasonable distance from entry; need at least 1:1 risk-to-reward
Shift stop to entry on remaining position once initial target is met; set reasonable limit
Bullish USD Trade: Sentiment exceeds market forecast
Need red, five-minute candle following the release to look at a short EURUSD entry
Implement same strategy as the bearish USD trade, just in reverse
Potential Price Targets For The Release
Fails to maintain upward trending channel; appears to be carving top
Keep an eye on the bearish divergence in the Relative Strength Index
Soft resistance/pivot: 1.3450; confluence on Fibonacci retracements at 1.3500
Need a close below 61.8% retracement (1.3340) for larger downturn
Interim support: 1.3240 (78.6% expansion), 1.3320 (50.0% retracement)
Impact that the U.S. Consumer Confidence survey has had on USD during the last month
Period
Data Released
Estimate
Actual
Pips Change
(1 Hour post event )
Pips Change
(End of Day post event)
JUL 2013
07/30/2013 14:00 GMT
81.3
80.3
-16
-7
July 2013 U.S. Consumer Confidence
U.S. household sentiment fell back from a five-year high, with the Conference Board’s survey narrowing to 80.3 from a revised 82.1 in June, but the recent weakness is likely to be short-lived as the economic recovery is expected to gradually gather pace in the second-half of the year. Despite the weaker-than-expected print, the initial reaction was short-lived as the headline figure marked the second-highest reading since January 2008, but we saw the greenback consolidate throughout the North American trade as the pair ended the day at 1.3261.
— 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
