AUD/USD: Trading the Australian Retail Sales November 2011

Australian Retail Sales is the most important indicator of consumer spending. The indicator’s release in the first week of each month provides analysts and traders with their first look at consumer spending for the previous month. A reading that is higher than the market forecast is bearish for the US dollar.

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

Published on Thursday at 00:30 GMT.

Indicator Background

Consumer spending is one of the most important components of the economy, and strong numbers in this sector signal growth and a stronger economy.

The Retail Sales indicator dipped into negative territory in July and August, but since then it has hovered in a narrow range of 0.4% – 0.6%. The November reading came in at 0.4%, slightly lower that the than the market forecast of 0.5%. The forecast for December remains unchanged at 0.4%, so the markets are not expecting any major movements  in the indicator this month.

Sentiments and levels

The weak economy in China, Australia’s main trading partner,  continues to have  a negative impact on the vital export sector. Commodity prices have not recovered, and the global slowdown and European debt crisis  are weighing on the Australian dollar. Thus, the overall sentiment is bearish on AUD/USD towards this release.

Technical levels, from top to bottom: 1.04, 1.0335, 1.0145, 1.00, 0.9953 ,0.9850, 0.9773 and 0.97.

5 Scenarios

1. Within expectations: 0% to 0.8%: In  such a case, the Aussie is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 0.9% to 1.3%: An unexpected higher reading can send AUD/USD well above one resistance line.
3. Well above expectations: Above 1.3%: Such an outcome would propel the pair upwards, and a second resistance line might be broken as a result.
4. Below expectations: -0.5% to -0.1%: A negative reading would rattle markets and could push AUD/USD below one level of support.
5. Well below expectations: Below -0.5%: Given the recent retail sales readings, such an event is unlikely. In this scenario, the Aussie will fall and could break a second support level.

For more about the Aussie, see the AUD to USD forecast.