How to trade US retail sales, five scenarios, levels to watch

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  • Economists expect US retail sales to fall in September.
  • The Fed’s slower-than-expected rate of decline implies that the greenback is pulling back.
  • Five scenarios await EUR / USD in response to this prominent data point.

Never underestimate the American consumer – shopping is the heart of the American economy, but with cuts in unemployment benefits, economists are expecting spending to pause. As the last high profile release of the week, the greenback is expected to respond.

Quick background

About 70% of the world’s largest economy is consumer-centric, and the stimulus checks linked to the pandemic have pushed that forward. In September, a mix of higher inflation – 5.4% year-on-year – and the expiration of a federal top-up to unemployment benefits likely lowered spending by 0.2%, depending on the economic calendar.

A weak number would show that the economy is slowing, therefore negative for the dollar, while a strong result would show that the recovery from the pandemic is strong – positive dollar.

Feeling and Levels

Unlike at the start of the week, the wind is now blowing against the dollar. The minutes of the Federal Reserve meeting showed that the world’s most powerful central bank is on the verge of cutting stimulus measures – but do it gradually. The Fed will cut its $ 120 billion / month bond purchase program at a rate of $ 15 billion / month instead of the $ 20 billion expected by some.

Additionally, the mood of the market has improved in response to efforts to alleviate supply chain issues, such as 24-hour labor at LA ports. Better market mood means a weaker dollar – and that sentiment will likely persist.

High to low levels: 1.1705 (late September high), 1.1670 (late September low), 1.1640 (early October high), 1.1610 (early October cap), 1.1585 (mid-October resistance), 1.1560 (early October) support), 1.1540 (mid-October support), 1.1525 (2021 low), 1.15 (psychologically significant level).

Five scenarios for EUR / USD

Expectations stand at -0.2% for Retail Sales, and the volatile nature of this indicator implies a wider range.

  1. In expectations: Any result between -0.4% and 0% could be considered within the range, especially since revisions from previous months tend to skew the answer. EUR / USD is likely to rise slightly, while remaining within the range – breakouts are unlikely.
  2. Above expectations: A positive result of + 0.1% to + 0.5% is slightly above estimates and would already boost the dollar. However, EUR / USD has limited room to break lower, given the bias against the dollar.
  3. Well above expectations: Any figure greater than or equal to + 0.6% would already cause EUR / USD to drop significantly, potentially slipping below a support line.
  4. Below expectations: A drop in retail sales of between 0.5% and 1% would be considered lower than estimated and could send EUR / USD above a resistance line.
  5. Well below expectations: A devastating fall of more than 1% would already completely offset last month’s gains and could trigger a substantial EUR / USD rally – potentially above two resistance lines.


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