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GBPUSD: Trading the U.K. Retail Sales Report

GBPUSD: Trading the U.K. Retail Sales Report

Trading the News: U.K. Retail Sales

What’s Expected:

Time of release: 03/22/2012 9:30 GMT, 5:30 EST

Primary Pair Impact: GBPUSD

Expected: -0.5%

Previous: 1.2%

DailyFX Forecast: -0.2% to 0.2%

Why Is This Event Important:

U.K. retail sales are projected to fall 0.5% in February after expanding 1.2% in the previous month, and the slowdown in private sector consumption may drag on the British Pound as it dampens the outlook for growth. As Bank of England board members David Miles and Adam Posen push for more quantitative easing, fears of a protracted recovery may lead the Monetary Policy Committee to extend its easing cycle, but an above-forecast print would curb speculation for more easing as central bank officials raise their fundamental assessment for the region.

Recent Economic Developments

The Upside




Mortgage Approvals (JAN)



CBI Reported Sales (FEB)



Private Consumption (4Q P)



The Downside




Consumer Price Index (YoY) (FEB)



Jobless Claims Change (FEB)



Average Weekly Earnings inc Bonus (3MoY) (JAN)



The resilience in private sector consumption paired with expectations for a more robust recovery may generate a strong retail sales report, and an above-forecast print could spark another run at 1.6000 as market participants scale back speculation for additional monetary support. However, subdued wage growth paired with the ongoing weakness in the labor market may weigh on household consumption, and the BoE may keep the door open to expand monetary policy further as it aims to encourage a stronger recovery. In turn, a weak sales figure may lead the GBPUSD to give back the advance from earlier this month, and we may see the pair fall back towards 1.5600 to test for near-term support.

Potential Price Targets For The Release

GBPUSD_Trading_the_U.K._Retail_Sales_Report_body_03.png, GBPUSD: Trading the U.K. Retail Sales Report

A look at the encompassing structure sees the sterling trading within the confines of a broad ascending channel formation dating back to the January 13th lows before encountering strong resistance at the confluence of the 78.6% Fibonacci retracement taken from the February 29th decline and trendline resistance dating back to September 19th just above the 1.59-figure. Daily support rests with the 200-day moving average with the 61.8% retracement at 1.5840 offering additional support. Note that RSI remains below trendline resistance dating back to February 7th with a breach above this level likely to alleviate the recent downside pressure on the pound.

GBPUSD_Trading_the_U.K._Retail_Sales_Report_body_03_1.png, GBPUSD: Trading the U.K. Retail Sales Report

Interim resistance for the GBPUSD stands at the 78.6% Fibonacci extension taken from the February 22nd and March 1st troughs at 1.5870 backed by 1.5890, and 1.5920. A breach above the 100% extension at 1.5945 further negates the bearish tone on the pair with such a scenario eyeing topside targets at 1.5975 and the 1.60-handle. Interim support rests with the 61.8% extension at 1.5815 backed by 1.5770 and the 38.2% extension at 1.5730. Should the print prompt a bearish response, look to target downside levels with a break below 1.5750 offering further conviction on a bearish directional bias.

How To Trade This Event Risk

Expectations for a drop in retail sales instills a bearish outlook for the sterling, but an above-forecast print could pave the way for a long British Pound trade as the data dampens expectations for more monetary easing. Therefore, if the report tops forecasts or unexpectedly increases from the previous month, we will need to see a green, five-minute candle following the release to establish a buy entry on two-lots of GBPUSD. Once these conditions are met, we will set the initial stop at the nearby swing low or a reasonable distance from the entry, and this risk will generate our first target. The second objective will be based on discretion, and we will move the stop on the second lot to cost once the first trade hits its mark in order to protect our profits.

On the other hand, the ongoing slack within the private sector paired with the stickiness in consumer prices may drag on consumption, and a dismal sales report could spark a selloff in the exchange rate as it raises speculation for additional monetary support. As a result, should retail spending fall short of market expectation, we will implement the same strategy for a short pound-dollar trade as the long position mentioned above, just in the opposite direction.

Impact that U.K. Retail Sales has had on GBP during the last month


Data Released



Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

JAN 2012

2/17/2012 9:30 GMT





January 2012 U.K. Retail Sales

GBPUSD_Trading_the_U.K._Retail_Sales_Report_body_ScreenShot045.png, GBPUSD: Trading the U.K. Retail Sales Report

Household consumption in the U.K. unexpectedly increased 1.2% after expanding 0.6% in December as businesses continued to conduct heavy discounting in order to draw demands. The ongoing improvement in private sector consumption propped up the British Pound, with the GBPUSD climbing back above 1.5850, but we saw the sterling consolidate during the North American to end the session at 1.5825.

--- Written by David Song, Currency Analyst and Michael Boutros, Currency Strategist

To contact David, e-mail Follow me on Twitter at @DavidJSong

To contact Michael email mboutros@dailyfx.comor follow him on Twitter @MBForex.

To be added to David's e-mail distribution list, send an e-mail with subject line "Distribution List" to

To be added to Michael’s email distribution list, send an email with subject line “Distribution List” to

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View the Expo Presentation on ‘Trading the News’ For Additional Resources

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