Forex Signal (Tue September 14 2010, 8:30am NY Time EDT) - US Core Retail Sales m/m

Henry Liu

Former FPA Special Consultant
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 0.2%

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.

It is important to consider the context of the market when trading news, therefore we need to pay attention to the level where USDJPY is at pre-release. If we are too close to historical lows, market may not react to a worse than expected release as support at the low may be too strong to break... Therefore, we should trade this release using after-news retracement trading method, making sure that there is momentum before jumping in.

For more information on my trading method:
Henry's News Trading Methods.

The Market
Core Retail market probably expanded moderately by 0.3% according to 63 economists surveyed by Bloomberg. This is partly due to the tax-free holiday shopping spree (17 days), which brought more shoppers to malls and retail stores in August. However, when considering the headline Retail figure, including the volatile Automobile component, market probably remained at 0.4% (0.1% more than core figure) as GM, Ford, and Toyota all reported slower than expected month.

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, and possibly make another 15 year lows and test the psychological 83.00 level.

Pre-news Consideration
Consumer Confidence and better than expected NFP release should add to some speculation that this Retail Sales figure might be better than expected. However, with market driven by risk aversion sentiment, we may see some limited market reaction... therefore stay out of pre-news for this release.

“(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.”

Historical Data and Chart For US Core Retail Sales


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Downside target?

So with a negative release and JPY below 83.00 any thoughts on the downside target? Obviously no support for the past two decades!


While thanking Liu once again for his analysis, can one explain some few things to me: Psychological Level. Risk Aversion and and Risk Sentiment.
Nice day.
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.

can someone explained to me further in depth about henry liu's quoted above :nerd: