US retail sales for the month of June will be released on Tuesday, July 15, 2014 at 12:30PM GMT. This number is a percentage representing the total change in value of inflation adjusted sales at the retail level. Essentially it measures consumer spending at the final level and thus gives a good indication of the overall economic activity. It is estimated to be 0.3% for June 2014 and was previously overestimated to be 0.6% (while actual was 0.3%).
Due to the seasonality of this indicator the figures appear volatile however they have an average range of -1% to 2%. Taking a look at the historical we observe that besides from a dip down in sales in January, economic activity has generally been increasing or fairly stagnant.
Another figure we can look at is manufacturing PMI which forecasts retail sales trends quite well. If we assume the recent uptrend is still to be reflected in the sales figures we may observe a higher than expected number for Tuesday’s announcement.
Major pairs affected by this announcement include the EURUSD and the GBPUSD.
NOTE: The account from which these screenshots are taken is a demo account and I have no vested interest in the pairs discussed.
The EURUSD doesn’t seem to exhibit any recent long-term trends like the other major pairs, however, it will have a general movement towards the upside or downside while it is accompanied by a lot of volatility. Its movement has been upwards since mid June while recently faltering but Tuesday’s announcement will have a major impact on where pair’s momentum for the rest of the week.
Key resistance of 1.36504 and support of 1.35751 will be the areas we will need to be concerned. Depending on the strength of the momentum at the breaks we would need to determine the probability of the pair’s continual movement away from its resistance/support.
While making new highs the GBPUSD had discovered a strong resistance which has halted its upward progression. The pair is currently demonstrating sideways movement as it bounces to and from two strong support and resistance levels. The two announcements (UK CPI and US Retail Sales) on Tuesday can have a great impact on this pair, we will have to wait and see how the market reacts to them to determine in which direction the pair will travel next.
For the GBPUSD key resistance seems to be around 1.71668 and support around 1.70842, again a break above resistance or below support will be key positions to enter trades. A lot of it will Depend on where the figures lie with respect to their forecasts and which announcement the market believes to be more integral to the valuation of the pair. The pair could go either way.