Forex Signal (Wed July 14, 2010 8:30am EST NY Time) U.S. Core Retail Sales

Henry Liu

Former FPA Special Consultant
Messages
473
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... Here's the forecast:

8:30am (NY Time) US Core Retail Sales Forecast 0.0% Previous -1.1%
ACTION: USD/JPY (CORE) BUY 0.6% SELL -0.6%


The Basic Trading Plan
Since we have both Retail Sales (Headline and Core, also known as ex auto) scheduled to be released at the same time, we should concentrate on the Core Release as it’s a better picture of the retail activities. 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 plan to trade this release is straight forward. We are going to wait for 0.6% of release or better to BUY USD/JPY (sell JPY), or a -0.6% 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.

The Market
Current market condition is somewhat driven by risk appetite as result of the postive Greek debt offering today and the surprise resilience of inflationary pressure in UK. Today's overall market is characterized with a strong demand for risk assets including all major commodity currencies... With that being said, having a strong Core Retail Sales reading will surely push current risk appetite sentiment to the next level, but a worse reading may add to the sell-offs on USD (against JPY) and curb risk appetite sentiment.

Additional Thoughts
With the current high unemployment rate and the dismal NFP readings in June, Retail Sales probably dropped to a worse than expected level. Auto sales reported by 2 of the largest automakers, Ford and GM, showed lower than expected demand, which will probably keep the headline Retail number low as well...

Retail sales reported by Target and GAP Inc. were also lower than forecasted, and these two retail giants sales activities were probably typical for the entire Retail sector in the U.S.

Therefore, market could be looking for a worse than expected release, we may even see some early sentiment moves attempting to price in this release ahead. If we get a surprise better than expected release, we should see a strong weakness in the JPY, which should give us a great trade on LONG USD/JPY. If we get a worse than expected release, JPY should strengthen and may push beyond the 88.00 level and retest the 87.00.

Important note: I use USD/JPY to gauge the market sentiment, especially when trading US news releases, since both JPY and USD are safe-haven currencies. However, the real underlying factor for this release is not a strong/weak USD, but risk appetite/aversion sentiment. On a risk appetite sentiment (or better Retail Sales), one can trade GBP/JPY LONG instead. One a risk aversion sentiment (or worse Retail Sales), one can SELL GBP/JPY.

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.”

For previous releases data of US Core Retail Sales and historical charts, click below:
US Core Retail Sales & Historical Charts

For more information on my trading method:
Henry Liu's News Trading Method

To see the actual charts, make sure you click on the "File Box" next to the news item on the right hand side. Historical chart should pop up in a new window.


 
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Mr. Madruga

Private
Messages
12
Hello Mr. Henry. Welcome to FPA.
I am training the after spike forex diamond strategy and this is the 1st time I can tell I have some profits with news trading.
Before the after spike strategy, I tryed for so many times to trade according to the news result itself. When I see the news result and go click buy or sell, the spike is already there and I missed the trade :) No metter how fast I try to be I miss it. I dont understand how you news traders can be that quick. Could you please give us your 50 cents about this subject?
 

Henry Liu

Former FPA Special Consultant
Messages
473
Hello Mr. Henry. Welcome to FPA.
I am training the after spike forex diamond strategy and this is the 1st time I can tell I have some profits with news trading.
Before the after spike strategy, I tryed for so many times to trade according to the news result itself. When I see the news result and go click buy or sell, the spike is already there and I missed the trade :) No metter how fast I try to be I miss it. I dont understand how you news traders can be that quick. Could you please give us your 50 cents about this subject?
Spike trading is pretty much dead, unless you use a special program and have a good broker that allows you to do lightening fast execution. Since it is very broker dependent, the only time that I spike trade is when we get an absolutely jaw-dropping surprise release. Such as an unexpected rate hike. Even if you get in at a very bad entry, the overall sentiment should carry your trade to profit regardless...
 

Henry Liu

Former FPA Special Consultant
Messages
473
thanks Henry for that article...just wanted to know how you come up with that 0.6 figure?
Historical figures and of course based on consensus expectation range. Usually what you are looking for is something that is out of the consensus range, which means a true surprise.

You can use the FPA calendar and go back to 2006 and look at every NZ Retail Sales... look at the ones that do work out, you'll see that a 0.6% should result in combined market movement in the direction of the release within 2 hours.
 

BillyMadison

Recruit
Messages
3
Excellent analysis

Thank you for taking the time to share your expertise and analysis on these news events. It is helpful and very appreciated. :)
 
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