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U.S. Retail Sales Tops Expectations in November, FOMC Takes Center Stage

By Michael Wright, Currency Analyst
14 December 2010 14:06 GMT

Advance retail sales in the world’s largest economy rose 0.8 percent in November after climbing a revised 0.8 percent the month prior, while retail sales less autos jumped 1.2 percent to mark the highest level since March. Subsequent to the report, the dollar rallied across most of its major counterparts, but the advance was short-lived as traders shift their focus to the FOMC rate decision.

Taking a look at the breakdown of the report, growth was led by apparel stores, gas stations, sporting goods, and non store retailers. Not to overlook, producer prices was released alongside retail sales. Annualized figures advanced 3.5 percent, topping forecasts’ of 3.3 percent. Producer prices are worth noting due to the fact that producers tend to pass on higher costs to consumers as higher retail prices. However, businesses may be reluctant to pass higher costs onto customers as the unemployment rate stands at its highest level since April.

Market participants will now shift their focus to the FOMC rate decision. As of late, traders are pricing in a zero percent chance that the Fed will raise borrowing costs 25 basis points later on today as the economy faces tight credit conditions, slow employment growth, and low consumer prices. As policy makers are likely to keep rates unchanged, comments trailing the rate decision are likely to dictate price action. The fed may adjust forecats for 2011 and 2012, while acknowledging 'improvement' in the economy. Join David Song to cover this report live!

GBPUSD Daily Chart

U.S._Retail_Sales_Tops_Expectations_in_November_body_gbpusd.png, U.S. Retail Sales Tops Expectations in November, FOMC Takes Center Stage

Source: FXCM’s Strategy Trader – Prepared by Michael Wright

The GBPUSD continues its northern journey after reversing course at November’s low of 1.5483. Price action now looks poised to test the 1.59 area in the short term as technical indicators point to additional gains. The MACD has yet to reverse after hinting at gains in early December, while the slow stochastic trends upward. So long as price action remains bounded by the ascending channel, upside risks remain. However, a break and a close 1.5750 may pave the way for a larger correction as the overall trend remains to the downside.

Written by Michael Wright, Currency Analyst

To Receive Future Articles by Email, please contact me at mwright@fxcm.com

Michael Wright is the author of FX Headlines, Fundamentals vs. Technical’s, Weekly Spotlight, Intraday Trading, and Forex Trading Weekly Forecast

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14 December 2010 14:06 GMT