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Trading the News: U.S. Advance Retail Sales

Updates to the U.S. Retail Sales report may spark a bearish reaction in the U.S. dollar as household spending is expected to increase 0.1% in July versus the 0.5% expansion the month prior.

Image of DailyFX economic calendar

A marked slowdown in private-sector consumption may dampen the appeal of the greenback as it casts a weakened outlook for growth, with the U.S. dollar at risk of facing near-term headwinds should the data prints dampen bets for four Fed rate-hikes in 2018.

Keep in mind, recent comments from the Federal Open Market Committee (FOMC) suggest the central bank will deliver a rate-hike in September as ‘the Committee expects that further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective over the medium term,’ but mixed data prints coming out of the economy may impede on the Fed’s hiking-cycle as ‘many District contacts expressed concern about the possible adverse effects of tariffs and other proposed trade restrictions, both domestically and abroad, on future investment activity.’

With that said, a dismal development may curb the recent weakness in EUR/USD, but an above-forecast Retail Sales print may fuel a further decline in the exchange rate as it boosts bets for four Fed rate-hikes in 2018. Sign up and join DailyFX Currency Analyst David Song LIVE for an opportunity to discuss potential trade setups.

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

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

JUN

2018

07/16/2018 12:30:00 GMT

0.5%

0.5%

-12

-7

June 2018 U.S. Retail Sales

EUR/USD 5-Minute Chart

Image of eurusd 5-minute chart

U.S. Retail Sales increased another 0.5% in June after expanding a revised 1.3% the month prior, with the advance led by a 2.2% rise in demand for health & personal care items. A deeper look at the report showed spending on motor vehicle & parts climbing 0.9%, with demand for building materials rising 0.8%, while discretionary spending on clothing slipped 2.5% during the same period.

The initial reaction in the greenback was short-lived, with EUR/USD consolidating throughout the North American trade to end the day at 1.1711. Review the DailyFX Advanced Guide for Trading the News to learn our 8 step strategy.

EUR/USD Daily Chart

Image of eurusd daily chart
  • Recent price action in EUR/USD raises the risk for a further decline in the exchange rate as it snaps the summer range, with the Relative Strength Index (RSI) also highlighting bearish dynamic as the oscillator pushes into oversold territory.
  • The close below the 1.1390 (61.8% retracement) to 1.1400 (50% expansion) region raises the risk for a move back towards 1.1290 (61.8% expansion), with the next region of interest comes in around 1.1220 (78.6% retracement) followed by the 1.1140 (78.6% expansion) area.

For more in-depth analysis, check out the Q3 Forecast for EUR/USD

Additional Trading Resources

New to the currency market? Want a better understanding of the different approaches for trading? Start by downloading and reviewing the DailyFX Beginners Guide!

Are you looking to improve your trading approach? Review the ‘Traits of a Successful Trader series on how to effectively use leverage along with other best practices that any trader can follow.

--- Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.