Forex Signal (Fri January 21 2011, 4:30am NY Time EST) - UK Retail Sales

Henry Liu

Former FPA Special Consultant
Messages
473
Today’s Retail Sales number from UK will be widely watched as this is a high impact yet tradable report. Here is the forecast for this release:

4:30am (NY Time) Forecast -0.2% Previous 0.3%
ACTION: GBP/USD BUY 0.4% SELL -0.8%


The Trade Plan
Retail Sales by definition is a direct measurement of consumer activities at the retail levels. A higher release is generally good for the economy, and better for it’s currency; a lower release is considered as negative for the economy and not good for it’s currency.

Our tradable deviation or surprise factor for UK Retail Sales is 0.6% to BUY or SELL. If our deviation is hit, we can expect the market to move at least 50 pips within the hour, with a historical accuracy of 72%. We’ll be looking to BUY GBP/USD if we get a 0.4% or better release, and SELL GBP/USD if we get a -0.8% or worse.

We'll be looking for an after-news retracement trade for this release. For more information on my trading methods:
Henry's News Trading Methods.

The Market
With the current inflationary pressure in UK on the rise, a better than expected Retail Sales could push Sterling higher above the current resistance levels, therefore I'd definitely be looking for that.

However, on a worse than expected release, with no immediate fundamental reason (the MPC Meeting Minutes is due next week), market could sell GBP off and follow the general trend of USD strength.

Additional Thoughts
I'm looking at the GBPNZD pair closely, with the pair reaching 2.1050, on a worse than expected number, this pair could drop a couple hundred pips.

Pre-news Consideration
There could be a pre-news sell for the Currency as market could be pricing in the harse weather condition in December and we could see much worse number on the Retail Sales.

For historical chart & data for UK Retail Sales


Thanks,


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