TheNews

- Euro-Zone Retail Sales to Expand for First Time Since July.
- Will Signs of a Stronger Recovery Encourage the ECB to Adopt an Improved Outlook?

Trading the News: Euro-Zone Retail Sales

A rebound in Euro-Zone Retail Sales may generate a near-term rebound in EUR/USD as signs of a stronger recovery raises the European Central Bank’s (ECB) scope to retain its current policy throughout 2016.

What’s Expected



Why Is This Event Important

After further reducing the deposited-rate and adjusting its quantitative-easing program in December, the Governing Council may largely endorse a wait-and-see approach in the first-half of the year as the non-standard measures continue to work their way through the real economy. Positive developments coming out of the monetary union may encourage the ECB to adopt an improved outlook for the region but, central bank President Mario Draghi may keep the door open to implement additional monetary support in order to achieve the mandate for price stability.

Expectations: Bullish Argument/Scenario

Release	Expected	Actual
Consumer Price Index (YoY) (DEC A)	0.3%	0.2%
Markit Purchasing Manager Index- Composite (DEC F)	54.0	54.3
Employment (QoQ) (3Q)	--	0.3%

Discounted prices paired with the pickup in private-sector activity may spur a marked rebound in household consumption, and a positive sales report may halt the near-term decline in the single-currency as market participants scale back bets for more ECB easing.

Risk: Bearish Argument/Scenario

Release	Expected	Actual
M3 Money Supply (YoY) (DEC)	5.2%	5.1%
Labour Costs (YoY) (3Q)	--	1.1%
Business Climate Indicator (NOV)	0.45	0.36

However, waning confidence accompanied the slowdown in private-lending may drag on retail sales, and a dismal development may encourage the ECB to further insulate the region as President Draghi largely retains a dovish outlook for monetary policy.

How To Trade This Event Risk
Bullish EUR Trade: Euro-Zone Retail Sales Climbs 0.2% or Greater

• Need green, five-minute candle following a positive growth report to consider a long EUR/USD trade.
• If market reaction favors a bullish Euro trade, buy EUR/USD with two separate position.
• Set stop at the near-by swing low/reasonable distance from cost; at least 1:1 risk-to-reward.
• Move stop to entry on remaining position once initial target is met, set reasonable limit.

Bearish EUR Trade: Private-Sector Spending Continues to Disappoint

• Need red, five-minute candle to favor a short EUR/USD trade.
• Implement same strategy as the bullish euro trade, just in reverse.

Potential Price Targets For The Release
EURUSD Daily

• EUR/USD remains at risk of giving back theadvance following the ECB’s December meeting amid the deviating paths for monetary policy but, the pair may consolidate going into the end of the week as market participants gauge the trajectory for U.S. interest rates.
• Interim Resistance: 1.1052 (November high) to 1.1090 (50% retracement)
• Interim Support: Interim Support: 1.0380 (78.6% expansion) to 1.0410 (61.8% expansion)

more...