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Tomorrow, at 12:30 pm GMT, the U.S. Census Bureau will publish its March report on retail sales.

The report tends to have a hefty impact on price action since it is the market’s primary gauge of consumer spending.

Moreover, many traders watch it because it is one of the earliest consumer spending data reports released in the month.

There are two versions of the report: the headline and the core.

The headline report estimates the change in the total value of goods sold by ALL retail establishments for the month in question. The core version does the same except that it disregards vehicle sales in its computation. It is also called the “ex-auto” version.

Economists predict that headline retail sales grew 0.4% in March, significantly lower than the 1.1% jump seen in February.

The core version, on the other hand, is projected to print a 0.6% increase for March versus the month prior’s 0.9% rise (revised up from 0.7%).

Clearly, the market is expecting weaker growth this time around, but there are some preliminary retail store reports from various market research firms that suggest that the actual result could be higher than the general market forecast.

For instance, the International Council of Shopping Centers (ICSC) indicated that the 22 major store retailers reported a whopping 4.1% growth in sales for March.

Likewise, Reuters’ version showed a 4.3% surge for the Month, which was notably higher than last year’s 1.8% increase.

The unexpected leap was mainly attributed to early Easter shopping and strong light-colored clothing purchases.

Yada, yada, yada… That’s great and all, but when are you going to get to the good stuff Forex Gump? How exactly can we traders make money off the report?

Hold your horses there, Johnny boy! To answer that, we have to take a look at how price moved in the last 3 releases.

January 12, 2012 (Headline: 0.1% actual vs. 0.3% forecast / Core: -0.2% actual vs. 0.3% forecast)

January 2012 Retail Sales Release EUR/USD

February 14, 2012 (Headline: 0.4% actual vs. 0.8% forecast / Core: 0.7% actual vs. 0.6% forecast)

February 2012 Retail Sales Release EUR/USD

March 13, 2012 (Headline: 1.1% as expected / Core: 0.9% actual vs. 0.8% forecast)

March 2012 Retail Sales Release EUR/USD

Looking at the past 3 releases, it appears that traders reacted to the core version rather than the headline figure.

You can see this clearly as the dollar rallied when the result was better than expected and fell when the core failed to meet consensus.

What can we take away from this? Well, given the solid preliminary readings on retail store sales, having a bullish bias tomorrow is a reasonable stance to have.

Another option is to go in the direction of the initial move. Set up orders for both directions prior to the release and quickly cancel one once one of your orders gets triggered. Be careful though, as you could experience slippage.

But of course, always remember that nothing is certain in forex and anything can happen! As traders, the most that we can do is find out the probabilities so that we can have a small edge. If you’re planning to trade this report, I wish you the best of luck!