Forex Trading Guide: U.S. June Retail Sales Report

News traders, unite! Uncle Sam is gearing up to release the June retail sales figures on Tuesday’s New York trading session so let’s figure out how to make forex profits off this report.

For the newbies out there, y’all should keep in mind that the U.S. retail sales report is among the top-tier releases that dollar traders look at. After all, it shows whether or not Americans increased their purchases of goods and services during the month and if they’re feeling much more confident about their financial situation and economic outlook. Bear in mind that consumer spending accounts for roughly two-thirds of overall economic activity in the U.S. so stronger-than-expected results tend to spur dollar gains while weaker-than-expected figures usually lead to a dollar selloff.

What’s expected for the June report?

For the month of June, the headline retail sales report is expected to show a mere 0.4% uptick, a slower pace of increase compared to the previous month’s 1.2% gain. Meanwhile, the core version of the report which excludes volatile items such as automobile sales could indicate a 0.7% increase, lower than May’s 1.0% rise.

A quick review of the ongoing trend in U.S. retail sales figures reveals that five out of the past six releases fell short of market expectations, which suggests a strong possibility of seeing a downside surprise. Take note, however, that this particular report has been seeing positive revisions in the past three months which still reflect positive contributions to overall growth.

How does the U.S. dollar usually react?

Based on the earlier release, the U.S. dollar doesn’t seem to be able to sustain its initial reaction to the report. For the month of May, the U.S. printed stronger-than-expected headline and core retail sales figures yet the Greenback’s rally was short-lived.

EUR/USD 15-min Forex Chart

EUR/USD 15-min Forex Chart

As you can see on EUR/USD’s 15-min forex chart on the June 11 release of the May retail sales figures, the pair initially sold off upon seeing the actual readings surpass expectations. However, traders must’ve quickly booked their profits when price hit the 1.1200 major psychological level and the reversal carried on for the rest of the trading session.

USD/JPY 15-min Forex Chart

USD/JPY 15-min Forex Chart

USD/JPY had a similar reaction to the report, as the pair surged to the 124.00 major psychological level right after the results were printed. From there, the initial rally was quickly faded, as traders cashed in their long positions at the key resistance area.

Forex Tips and Tricks

If you’re considering trading this report, here are some tips and tricks you can remember:

  • Strong figures tend to boost the Greenback while weak figures could trigger a selloff, but this initial reaction is usually limited
  • If you’ve missed the initial move, you could try fading the reaction on a psychological support or resistance level and holding on until the end of the U.S. trading session
  • If you’re waiting for confirmation, you could hold out for a long-wicked candle to signal a potential reversal
  • There’s no shame in sitting on the sidelines if you’re not comfortable with this increased volatility among dollar pairs right around the release!

That’s all I got! How about you? What’s your game plan for this economic report? Don’t be shy to share your thoughts in our comments section below!