Sunday, May 11, 2008

US Dollar: US Retail Sales Could Get A Surprise Boost on Tuesday - Why?

Advance Retail Sales are expected to fall back 0.2 percent after showing a surprising 0.2 percent gain during the month prior, but given the current economic scenario, this figure could prove to be even more disappointing when announced at 8:30 EDT.



What Are The Markets Facing?

Advance Retail Sales are expected to fall back 0.2 percent after showing a surprising 0.2 percent gain during the month prior, but given the current economic scenario, this figure could prove to be even more disappointing when announced at 8:30 EDT. Indeed, consumer confidence is rapidly deteriorating and energy prices continue to skyrocket. During the month of April, the University of Michigan consumer confidence survey plunged to a 26-year low of 62.6 while the Conference Board’s measure dipped down to a 5-year low of 62.3 on a gloomy combination of jittery financial markets, a collapsing housing sector, and oil rocketing to record highs. There is little doubt that retailers are contending with difficult circumstances as they are forced to offer the biggest discounts possible in order to draw customers, which will negatively impact profit margins. However, there is potential for the Advance Retail Sales index to actually show a positive increase as the result of prices, namely, sales at fuel stations. Indeed, this index is not adjusted for inflation and average gas prices rose above $3.50/gallon during the month and have only continued to rise.

Bonds – 10-Year Treasury Note Futures

A daily chart of Treasuries highlights the break above trendline resistance and the subsequent advance toward resistance at the confluence of the 100 SMA and 38.2 percent fib at 116-20. While we are likely to see a test of this resistance level on Monday, Tuesday’s release of US Advance Retail Sales provides significant event risk for the contract. Indeed, retail sales are forecasted to slump, which could support the case for additional Treasury gains. On the other hand, if rocketing gas prices lead the headline retail sales index to deceptively rise, the contract could pull back toward support near 115.

1 comment:

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