- U.S. Advance Retail Sales to Rebound After Holding Flat in April.
- Household Spending Has Failed to Meet Market Forecast the Last Five Straight Prints.
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Trading the News: U.S. Advance Retail Sales
A 1.2% rebound in U.S. Retail Sales may increase the appeal of the greenback and highlight a more bearish outlook for EUR/USD as the Fed remains on course to normalize monetary policy in 2015.
What’s Expected:
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Why Is This Event Important:
Signs of a stronger recovery may encourage the Federal Open Market Committee (FOMC) to adopt a more hawkish tone at the June 17 interest rate decision, and expectations for higher borrowing-costs may spur a resumption of the long-term bullish USD trend as the central bank moves away from its easing cycle.
Expectations: Bullish Argument/Scenario
| Release | Expected | Actual |
|---|---|---|
| Consumer Credit (APR) | $16.000B | $20.541B |
| Average Hourly Earnings (YoY) (MAY) | 2.2% | 2.3% |
| Non-Farm Payrolls (MAY) | 226K | 280K |
The pickup in job/wage growth along with the ongoing expansion in private-sector credit may encourage a marked rebound in household consumption, and an upbeat print may trigger a bullish reaction in the greenback as it boosts interest rate expectations.
Risk: Bearish Argument/Scenario
| Release | Expected | Actual |
|---|---|---|
| Consumer Price Index ex Food & Energy (YoY) (APR) | 1.7% | 1.8% |
| Personal Consumption (1Q P) | 2.0% | 1.8% |
| U. of Michigan Confidence (MAY P) | 95.9 | 88.6 |
Nevertheless, retail sales may continue to disappoint amid easing discounts paired with waning consumer confidence, and another weaker-than-expected report may drag on the dollar as it raises the for a further delay in the Fed’s normalization cycle.
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How To Trade This Event Risk(Video)
Bullish USD Trade: U.S. Retail Sales Rebounds 1.2% or Greater
- Need red, five-minute candle following a positive print to consider a short EUR/USD trade.
- If market reaction favors a bullish dollar trade, sell EUR/USD 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: Household Spending Continues to Disappoint
- Need green, five-minute candle to favor a long EUR/USD trade.
- Implement same setup as the bullish dollar trade, just in reverse.
Potential Price Targets For The Release
EURUSD Daily
Chart - Created Using FXCM Marketscope 2.0
- EUR/USD appears to be stuck in a long-term wedge/triangle formation following the failed attempt to test the February high back in May; remains at risk for range-bound prices as market participants weigh the outlook for monetary policy.
- DailyFX Speculative Sentiment Index (SSI) shows the retail crowd remains net-short EUR/USD since May 19, with the ratio currently standing at -2.17.
- Interim Resistance: 1.1510 (61.8% expansion) to 1.1532 (February high)
- Interim Support: 1.0970 (38.2% expansion) to 1.1000 (50% retracement)
Read More:
Price & Time: USD/JPY Backtest or Something More?
USDCAD Breakdown at Initial Support- Short Scalps Favored Sub 1.24
Impact that the U.S. Retail Sales report has had on EUR/USD during the previous month
| Period | Data Released | Estimate | Actual | Pips Change | Pips Change |
|---|---|---|---|---|---|
APR 2014 | 05/13/2014 12:30 GMT | 0.2% | 0.0% | +52 | +86 |
April 2015 U.S. Advance Retail Sales
U.S. Retail Sales unexpectedly held flat in April following a revised 1.1% advance the month prior. A deeper look at the report showed a 2.2% decline in department stores sales, which was accompanied by a 0.7% decline in gasoline receipts, while discretionary spending on clothing increased another 0.2% after climbing 0.9% in March. The ongoing in private-sector consumption dragged on the greenback, with EURUSD clearing the 1.1300 handle to end the North American trade at 1.1353.
--- Written by David Song, Currency Analyst and Shuyang Ren
To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.
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