Another contraction in U.S. Retail Sales may drag on the greenback and
generate a near-term rebound in EUR/USD as it dampens the Fed’s scope to
raise the benchmark interest rate in mid-2015.
EUR/USD Daily
U.S. Retail Sales contracted 0.9% in December, largely driven by lower gas receipts, after climbing a revised 0.4% the month prior. Despite the worse-than-expected print, it seems as though the Fed remains confident in raising the benchmark interest rate in mid-2015 as the central bank anticipates falling oil prices to have a positive impact on the economy as it boosts disposable incomes. Nevertheless, the dollar struggled to hold its ground following the print, with EUR/USD climbing above the 1.1825 region, but the market reaction was short-lived as the pair consolidated throughout the North America trade to end the day at 1.1773.
What’s Expected:
Why Is This Event Important:
The Fed may have little choice but to further delay its normalization
cycle as lower energy costs show little evidence of boosting
private-sector consumption, and we may see the central bank implement a
more dovish twist to the forward-guidance for monetary policy as it
struggles to achieve the 2% target for inflation.
Nevertheless, the pickup in job/wage growth may pave the way for a
better-than-expected print, and a positive development may spark a
bearish reaction in EUR/USD as market participants ramp up bets for
higher borrowing-costs.
How To Trade This Event Risk
Bearish USD Trade: U.S. Retail Sales Falls Another 0.4% or Greater
- Need green, five-minute candle following the release to consider a long trade on EUR/USD.
- If market reaction favors a bearish dollar trade, buy EUR/USD with two separate position.
- Set stop at the near-by swing low/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.
- Need red, five-minute candle to favor a short EUR/USD trade.
- Implement same setup as the bearish dollar trade, just in reverse.
EUR/USD Daily
- Long-term outlook for EUR/USD remains bearish as the RSI retains the downward trend carried over from back in October 2013.
- Interim Resistance: 1.1600 pivot to 1.6110 (61.8% expansion)
- Interim Support: 1.1096 (2015 low) to 1.1100 pivot
| Period | Data Released | Estimate | Actual | Pips Change (1 Hour post event ) | Pips Change (End of Day post event) |
|---|---|---|---|---|---|
| DEC 2014 |
01/14/2014 13:30 GMT | -0.1% | -0.9% | +30 | -1 |
U.S. Retail Sales contracted 0.9% in December, largely driven by lower gas receipts, after climbing a revised 0.4% the month prior. Despite the worse-than-expected print, it seems as though the Fed remains confident in raising the benchmark interest rate in mid-2015 as the central bank anticipates falling oil prices to have a positive impact on the economy as it boosts disposable incomes. Nevertheless, the dollar struggled to hold its ground following the print, with EUR/USD climbing above the 1.1825 region, but the market reaction was short-lived as the pair consolidated throughout the North America trade to end the day at 1.1773.
