Feel like trading news reports before the big NFP release on Friday?
If you do, then you might want to try your hand at trading Australia’s retail sales release.
Here are three things you need to know before you trade the report!
What is this report all about?
On Thursday at 1:30 am GMT (that’s late Wednesday for U.S. traders out there), Australia will print its retail trade numbers.
The report measures the sales of retail goods and services and is released by the Australian Bureau of Statistics (ABS) 30 days following the end of the reporting month.
Consumer spending accounts for roughly 54% of Australia’s GDP. An increase in local consumption tends to encourage businesses to step up their production to meet rising demand, eventually translating to a pickup in hiring. Better employment conditions are good for consumer confidence, which then keeps spending and growth supported.
The actual figure is likely to miss market expectations
Australia’s monthly retail numbers have missed market estimates in four out of the five last releases.Heck, even the annualized readings have been showing slower growth since November 2015.
Interestingly, the Aussie tends to have a direct correlation with the reports.
That is, a worse-than-expected reading tends to push AUD/USD lower while strong figures tend to push it higher.
Back in July, AUD/USD consolidated around its Asian session levels and didn’t see any bearish momentum until halfway through the London session. It ended up closing 90 pips (-1.19%) pips lower than its daily open price.
Then, earlier this month a weak reading for the month of May put a halt on AUD/USD’s intraday uptrend, pushing the pair 36 pips lower (-0.47%) before going back on its merry way up the charts until the end of the day.
Tips and tricks
Retail purchases in Australia are expected to have risen by 0.3% for the month of June following a 0.1% uptick in May. Based on the last two releases, we can see that AUD/USD usually has a straightforward reaction to the releases.
This means that the challenge is in timing your trade exits. As you can see above, the Aussie tends to go back to its pre-report intraday trends sometime during the start-up to the middle of the London session, as traders take profits ahead of the U.S. session brouhahas.
One good strategy would be to trade in the direction of the report and take profits before the London session begins.
Or, if you’re trading in the direction of the pre-report intraday trend and don’t mind the risk, then you can also opt to adjust your risk exposure and hold on to your position until the end of the day. In any case, make sure you practice good risk management when executing your plans!