Wednesday, July 13, 2011

U.S. Core Retail Sales & Retail Sales - 14 July 2011

We´ll be getting the U.S. Core Retail Sales (and Retail Sales) figure out today. 

As high impact news releases are concerned, Retail Sales make up about 2/3 of U.S. GDP (Gross Domestic Product); Core Retail Sales report excludes Auto sales which comprises 20% of total retail sales. 

Therefore, we are more focused on daily consumer spending on goods found in such places as department stores, gas stations, and restaurants.

Here´s the forecast:

8:30am (NY Time) US Core Retail Sales Forecast 0.1% Previous 0.3%

ACTION: 0.6% BUY USDJPY / -0.4% BUY EURUSD

The Trade Plan

The plan to trade this release is straight forward. We are going to wait for 0.6% release or better to BUY USD/JPY, or a -0.4% or worse to BUY EUR/USD. If we get a in-between release, we´ll need to look at the pre-release market condition and sentiment in order to make a decision, or just stay out of the market al together.

We will trade this news release using after news retracement method, I will pay attention to both headline and Core Retail Sales figures, but my focus will be on the Core figure.

The Market
 
Retail Sales in June probably fell as the June NFP only showed a measly growth of 18K jobs. With gasoline prices are on the decline, from $3.91 to $3.68 per gallon on the average, and supply of components still falling short, the automotive sector could drag down the overall headline Retail Sales number.
On the other hand, Same Store Sales figure compiled by Reuters showed a 6.5% growth in the top 25 department stores in June, which provide a compelling reason that the Core Retail Sales figure may come out slightly positive as expected.

Additional Thoughts

Since both releases (Core Retail Sales and Retail Sales) are scheduled together, if we get a conflict in the releases, we should stay out regardless whether or not we get our tradable deviation.

Pre-news Consideration

There should be no pre-news trading.

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."

Thanks,