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FX Week Ahead - Top 5 Events: July US Retail Sales Report & EUR/USD Rate Forecast

FX Week Ahead - Top 5 Events: July US Retail Sales Report & EUR/USD Rate Forecast

2019-08-10 21:10:00
Christopher Vecchio, CFA, Sr. Currency Strategist
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July US Retail Sales Report Overview:

  • The July US retail sales report (retail sales advance) is due out on Thursday, August 15 at 12:30 GMT, and it is due to confirm signs that the US economy is slowing down.
  • The US Dollar (via the DXY Index) has seen a great deal of volatility in recent weeks, but EURUSD will come into focus in particular as the largest component of the DXY Index has broken its downtrend from the June and July swing highs.
  • Retail traders have remained net-long since July 1 when EURUSD traded near 1.1373; price has moved 1.5% lower since then.

Join me on Mondays at 7:30 EDT/11:30 GMT for the FX Week Ahead webinar, where we discuss top event risk over the coming days and strategies for trading FX markets around the events listed below.

08/15 THURSDAY | 12:30 GMT | USD RETAIL SALES ADVANCE (JUL)

Consumption is the most important part of the US economy, generating around 70% of the headline GDP figure. The best monthly insight we have into consumption trends in the US might arguably be the Advance Retail Sales report. In July, according to a Bloomberg News survey, consumption slumped with the headline Advance Retail Sales due in at 0.3% from 0.4% (m/m). Similarly, the Retail Sales Control Group, the input used to calculate GDP, is due in at 0.4% from 0.7% (m/m).

Atlanta Fed GDPNow: Q3’19 Growth Estimate (Chart 1)

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Growth expectations may only be mildly supported coming out of the data, and the Atlanta Fed GDPNow Q3’19 growth estimate should remain below 2%. In turn, Fed rate cut odds may not recede further, offering little support for the US Dollar.

Pairs to Watch: DXY Index, EURUSD, USDJPY, Gold

EURUSD Technical Analysis: Daily Timeframe (June 2016 to August 2019) (Chart 2)

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Several bottoming efforts in recent months have failed to produce a meaningful turn in EURUSD: the bullish falling wedge entering 2019; the bullish falling wedge between January and May; and the rising channel between May and July. Despite EURUSD hitting a fresh yearly low on August 1, it now appears that the pair is attempting yet another bottoming effort as it has now broken the downtrend from the June and July swing highs.

EURUSD price action has had trouble establishing a topside move, despite four consecutive closes above the June and July downtrend, price has yet to close through the July 9/July 17 swing lows around 1.1203. To provide some credit for a bullish turn, price is holding above the daily 8-, 13-, and 21-EMA envelope. Similarly, Slow Stochastics have extended their advance above the neutral line towards overbought condition. Daily MACD remains in bearish territory, but it has been trending higher for four consecutive days.

IG Client Sentiment Index: EURUSD Rate Forecast (August 9, 2019) (Chart 3)

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EURUSD: Retail trader data shows 53.2% of traders are net-long with the ratio of traders long to short at 1.14 to 1. In fact, traders have remained net-long since July 1 when EURUSD traded near 1.1373; price has moved 1.5% lower since then. The number of traders net-long is 8.1% lower than yesterday and 28.9% lower from last week, while the number of traders net-short is 3.1% higher than yesterday and 35.4% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EURUSD prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current EURUSD price trend may soon reverse higher despite the fact traders remain net-long.

FX TRADING RESOURCES

Whether you are a new or experienced trader, DailyFX has multiple resources available to help you: an indicator for monitoring trader sentiment; quarterly trading forecasts; analytical and educational webinars held daily; trading guides to help you improve trading performance, and even one for those who are new to FX trading.

--- Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher, email him at cvecchio@dailyfx.com

Follow him in the DailyFX Real Time News feed and Twitter at @CVecchioFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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