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EURUSD May Hold March Open Range as U.S. Retail Sales Rebound

By , Currency Analyst  and Gregory Marks
13 March 2014 07:00 GMT

- U.S. Retail Sales to Increase for First Time in Three-Months

- Household Spending Rose 10 Months in 2013

Trading the News: U.S. Advance Retail Sales

A rebound in U.S. Retail Sales may generate a meaningful rebound in the dollar as it raises the prospects for a stronger recovery in the world’s largest economy.

What’s Expected:

Time of release: 03/13/2014 12:30 GMT, 8:30 EDT

Primary Pair Impact: EURUSD

Expected: 0.2%

Previous: -0.4%

DailyFX Forecast: -0.2% to 0.4%

Why Is This Event Important:

With the Federal Open Market Committee (FOMC) widely expected to discuss another $10B taper at the March 19 meeting, a pickup in private sector consumption may put increased pressure on the central bank to normalize monetary policy sooner rather than later, but we may see Fed Chair Janet Yellen preserve the zero-interest rate policy (ZIRP) for an extended period of time in an effort to curtail the ongoing slack in the real economy.

Expectations: Bullish Argument/Scenario

Release

Expected

Actual

Change in Non-Farm Payrolls (FEB)

149K

175K

Average Hourly Earnings (YoY) (FEB)

2.0%

2.2%

Personal Income (JAN)

0.2%

0.3%

Faster wage growth along with uptick in employment may generate a large pickup in household spending, and a positive development should encourage a more meaningful advance in the dollar as it raises the outlook for growth and inflation.

Risk: Bearish Argument/Scenario

Release

Expected

Actual

Consumer Credit (JAN)

$14.000B

$13.698B

Consumer Confidence (FEB)

80.0

78.1

Consumer Price Index (YoY) (JAN)

1.6%

1.6%

However, retail spending may fall short of market expectations amid rising prices paired with the slowdown in private sector credit, and a dismal sales report may spur a further decline in the greenback as it drags on interest rate expectations.

How To Trade This Event Risk(Video)

Join DailyFX on Demand for Full Coverage of the U.S. Retail Sales Report

Bullish USD Trade: Household Spending Increases 0.2% or Greater

  • Need to see red, five-minute candle following the release to consider a short trade on EURUSD
  • If market reaction favors a long dollar 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: Retail Sales Disappoints

  • Need green, five-minute candle to favor a long EURUSD trade
  • Implement same setup as the bullish dollar trade, just in the opposite direction

Potential Price Targets For The Release

EURUSD Daily

Forex_EURUSD_May_Hold_March_Open_Range_as_U.S._Retail_Sales_Rebound_body_Picture_2.png, EURUSD May Hold March Open Range as U.S. Retail Sales Rebound

Chart - Created Using FXCM Marketscope 2.0

  • Remains Upward Trending Channel While Preserving March Opening Range (1.3914)
  • Bullish RSI Momentum Continues to Favor Further Advances
  • Interim Resistance: 1.3800 (100.0% expansion) to 1.3830 (61.8% retracement)
  • Interim Support: 1.3450 (38.2% retracement) to 1.3460 (50.0% expansion)

Impact that the U.S. Retail Sales Report has had on EUR/USD during the last release

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

JAN 2014

02/13/2014 13:30 GMT

0.0%

-0.4%

Flat

+7

January 2014 U.S. Retail Sales

Forex_EURUSD_May_Hold_March_Open_Range_as_U.S._Retail_Sales_Rebound_body_Picture_1.png, EURUSD May Hold March Open Range as U.S. Retail Sales Rebound

Volatility across the board was muted at the last Retail Sales report even though the headline figure missed market expectations by four tenths of a percent. EURUSD had seen some strength earlier in the day on account of German CPI meeting estimates of -0.6% MoM. As for this print, it is likely this is the last figure analysts can continue to blame on poor weather conditions in the northeast. Note that the headline figure may be dragged lower following recent reports out of automakers regarding poor sales as of late.

--- Written by David Song, Currency Analyst and Gregory Marks

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

To be added to David's e-mail distribution list, please follow this link.

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13 March 2014 07:00 GMT