GBP/USD: Trading the British Retail Sales Feb 2013

The British Retail Sales is considered one of the most important indicator of consumer spending. The indicator’s release in the first week of each month provides analysts and traders with  an early  look at consumer spending. A reading that is higher than the market forecast is bullish for the pound.

Here are all the details, and 5 possible outcomes for GBP/USD.

Published on Friday at 9:30 GMT.

 Indicator Background

Retail Sales is considered the most important indicator of consumer spending,  which is a critical component of economic growth. Given its importance, an unexpected Retail Sales reading can  have a major impact on  the movement of GBP/USD.

The  January release was a disappointment, with a decline of 0.1%. The markets are expecting a rebound in the upcoming reading, with an estimate of a 0.5% gain. Will the indicator meet or beat expectations?

Sentiments and levels

After a horrendous January, the pound continues to struggle against the dollar.  UK data  has not impressed the markets, and  the pound will have a tough time sustaining upward momentum if the the British economy continues to limp along. So, the overall sentiment is bearish on GBP/USD towards this release.

Technical levels, from top to bottom: 1.5850, 1.5750, 1.5648, 1.5516, 1.5406 and  1.5361.

5 Scenarios

1. Within expectations: 0.2% to 0.8%: In such a case,  GBP/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 0.8% to 1.1%: An unexpected higher reading can send GBP/USD above one resistance line.
3. Well above expectations: Above 1.1%: Such an outcome would propel the pair upwards, and a second resistance line might be broken as a result.
4. Below expectations: -0.2% to 0.1%: A negative reading could push  GBP/USD below one level of support.
5. Well below expectations: Below -0.2%: In this scenario, the  pound  will likely take a hit,  and could break a second support level.

For more about the pound, see the  GBP to USD forecast.

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