- U.S. Advance Retail Sales to Rise for First Time in Three-Months.
- Will Lower Energy Prices Fuel Private-Sector Consumption?
Trading the News: U.S. Advance Retail Sales
A rebound in U.S. Retail Sales may heighten the bullish sentiment surrounding the greenback and spur a further decline in EUR/USD as it fuels speculation for higher borrowing-costs in the world’s largest economy.
What’s Expected:
The Fed may stay on course to normalize monetary policy in mid-2015 as the central bank anticipates lower energy prices to boost private-sector consumption – one of the leading drivers of growth – and Chair Janet Yellen may adopt a more hawkish tone at the March 18 meeting as the board remains confident in achieving the 2% target for inflation.
Expectations: Bullish Argument/Scenario
|
Release |
Expected |
Actual |
|
Non-Farm Payrolls (FEB) |
235K |
295K |
|
Gross Domestic Product (Annualized) (QoQ) (4Q P) |
2.0% |
2.2% |
|
Durable Goods Orders (JAN) |
1.6% |
2.8% |
Greater demand for large-ticket items paired with the ongoing improvement in the labor market may generate a better-than-expected retail sales figure, and a positive development may put increased pressure on the Fed to move away from its zero-interest rate policy (ZIRP) as growth prospects improve.
Risk: Bearish Argument/Scenario
|
Release |
Expected |
Actual |
|
Consumer Credit (JAN) |
$14.750B |
$11.562B |
|
Average Hourly Earnings (YoY) (FEB) |
2.2% |
2.0% |
|
Personal Income (JAN) |
0.4% |
0.3% |
Nevertheless, subdued wages along with the slowdown in private-sector credit may drag on retail spending, and another unexpected contraction may further delay the Fed’s normalization cycle as the ongoing weakness in household earnings undermines the central bank’s scope to achieve the inflation target.
Bullish US Dollar Trade: U.S. Retail Sales Rebounds 0.3% 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 Disappoints
- 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
EUR/USD Daily Chart
Chart - Created Using FXCM Marketscope 2.0
- Despite the long-term bearish outlook for EUR/USD, will keep a close eye on the Relative Strength Index (RSI) as it approaches key support levels.
- Interim Resistance: 1.1185 (23.6% expansion) to 1.1210 (61.8% retracement)
- Interim Support: 1.0375 (78.6% expansion) to 1.0400 pivot
Impact that the U.S. Retail Sales report has had on EUR/USD during the previous month
|
Period |
Data Released |
Estimate |
Actual |
Pips Change (1 Hour post event ) |
Pips Change (End of Day post event) |
|
JAN 2014 |
02/12/2014 13:30 GMT |
-0.4% |
-0.8% |
+20 |
+97 |
January 2014 U.S. Advance Retail Sales
U.S. Retail Sales declined another 0.8% in January following a 0.9% contraction the month prior. Despite lower energy costs, discretionary spending at department stores slipped for the second consecutive month, while demand for motor vehicles and parts slid another 0.5% during the same period. Following the worse-than-expected print, the greenback struggled to hold its ground, with EUR/USD climbing above the 1.1400 handle and closed the day at 1.1428.