AUD/USD: Trading the Australian Retail Sales July 2012

Australian Retail Sales is considered one of the most important consumer indicators. 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 bearish for the US dollar.

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

Published on Wednesday at 1:30 GMT.

 Indicator Background

Retail Sales,  a  key indicator, helps analysts measure consumer spending, which  is  a critical  component of economic  growth.  The  indicator provides a snapshot of the levels of consumer spending as well as  consumer  confidence in the Australian economy.

The  June reading of -0.2%  was a disappointment, falling well short of the market expectations of a 0.2% rise. It was also the indicator’s weakest release in 2012. The  markets are predicting a rebound in July, with an estimate of a 0.3% increase.

Sentiments and levels

The Australian dollar had a big gain after  last week’s  EU Summit, but this spike is likely to prove a temporary blip. Australia continues to suffer from the global slowdown, and the turmoil in the Euro-zone and weakness in the US economy will not disappear anytime soon. However, unexpected news, the type of which we witnessed at the EU Summit, can quickly affect the direction of the unpredictable Australian dollar. So, the overall sentiment is  neutral on AUD/USD towards this release.

Technical levels, from top to bottom: 1.0482, 1.0402, 1.0340, 1.0231, 1.0174 and 1.0080.

5 Scenarios

1. Within expectations: 0% to 0.6%: In such a case, the Aussie is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 0.7% to 1.0%: An unexpected higher reading can send AUD/USD well 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: -0.4% to -0.1%: A negative reading could push AUD/USD below one level of support.
5. Well below expectations: Below -0.4%: 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.