We’ll be getting the Core Retail Sales (and Retail Sales) figure out of U.S. today, as high impact news releases are concerned, Retail Sales makes up about 2/3 of U.S. GDP (economy)… Here’s the forecast:
8:30am (NY Time) US Core Retail Sales Forecast 0.3% Previous -0.1%
ACTION: USD/JPY BUY 0.9% SELL -0.3%
Since we have both Retail Sales & Core CPI scheduled to be released at the same time, we should concentrate on the Retail Sales as it provides a better glimpse of the economy. However, it’s important to make sure there is no conflict between both releases or we should just stay out of the market until a new direction has been established.
The Trade Plan
The plan to trade this release is straight forward. We are going to wait for 0.9% of release or better to BUY USD/JPY (sell JPY), or a -0.3% or worse to SELL USD/JPY (buy JPY)… If we get a in-between release, we’ll need to look at the pre-release market condition in order to make a decision, or just stay out of the market altogether.
As stated before, due to both high impact releases coming out the same time, we have to trade these releases using after news retracement method because market reaction may be hard to predict.
The Market
Current market condition is driven by risk aversion as result of the slew of negative data from China, ECB Trichet, and FOMC Statements. I believe this could be the beginning of a major trend shift, therefore I’d suggest to follow the current risk sentiment until there is a reason not to.
Additional Thoughts
Market could be trading in a tight range coming to this event, if we get a positive release, we could see some consolidation in recent risk aversion moves, which will be against USD (yes, better number could be bad for USD). However, we’ll probably see a delayed reaction as the initial move would be pro-USD, and then market will turn around as funds shift out of U.S. Treasuries into riskier assets.
On the other hand, if we get a worse than expected number, we could see further strengthening of USD as flight to safety moves dominate the market. At the very least, we could see USD/JPY moving towards the low once again, which may provide another LONG entry at above 84.70.
Pre-news Consideration
With the current high unemployment rate and the dismal NFP readings in July (-131K) following -221K in June, Retail Sales probably dropped to a worse than expected level. Even though some signs of improvement is showing in the household spendings, I believe overwhelming majority of speculator are looking for a worse number. Therefore, I’d expect some limited pre-selling of USD and I’d be looking at GBP/USD for safer BUY trade.
DEFINITION:
“(Retail Sales Core) Derivative of Retail Sales that excludes the Automobile Sales component. Automobile Sales make up roughly 25% of Retail Sales, but they can be very volatile from month to month and can distort the picture. Retail Sales with the exclusion of this volatile component is thought to be a better indicator of the underlying trend in consumer spending.”
Related posts:
- US Core Retail Sales m/m 11/16/09
- US Core Retail Sales m/m 10/14/09
- US Core Retail Sales m/m 12/11/09
- US Core CPI m/m 11/18/09
- US Core Retail Sales m/m 09/15/09
- Forex Trade Plan For NZ Retail Sales m/m 07/13/10
- Forex Trade Plan For NZ Retail Sales 08/12/10
- Forex Trade Plan NZ Retail Sales 09/13/10
- Forex Trade Plan For AU Retail Sales 08/30/10
- Forex Trade Plan For CA Core CPI m/m 08/20/10
{ 2 comments… read them below or add one }
hello, thnx a lot henry for ur wonderful analysis on major imp. News Releases. But today I found ur post bit confusing for me at least..
You said: “Current market condition is driven by risk aversion as result of the slew of negative data from China, ECB Trichet, and FOMC Statements.”, So my question is as a result of negative data data from China, ECB Trichet, and FOMC Statements for USD, USD should go down rather than going up so why market sentiment is risk aversion when data coming about USD is bad??
and Secondly, you said, “if we get a worse than expected number, we could see further strengthening of USD as flight to safety moves dominate the market. At the very least, we could see USD/JPY moving towards the low once again”. You said if number is worse than expected we should see strenghthing on usd, on the other hand you are saying that usd will go down against USD. Pretty confusing!!
Can you please explain these two stataments of yours for better understanding ? regards
When market is in risk aversion USD should be stronger. However, JPY could be even stronger than USD.