How to Trade the UK Retail Sales Report with the GBPUSD

[DailyFx]

What is Expected

Time of release: 05/18/2007 08:30 GMT, 04:30EST
Primary Pair Impact : GBP/USD
Expected: 0.6%
Previous: 0.3%









How To Trade This?
The UK Retail Sales report tends to produce strong reactions in the British Pound, but often limited extension makes it a challenging report to produce post-news profits. We nonetheless see that two of the past three releases have allowed for solid gains?leaving hope for a similar result in the upcoming announcement.
Given that the GBPUSD now trades at the bottom of its recent channel, any positive surprises in the Retail Sales report could easily take the currency higher through subsequent price action. The nearest support level offers an attractive risk-to-reward ratio on a GBPUSD long, and the nearest resistance zone would likewise leave room for post-news extension. If the UK Retail Sales print surprises to the topside, the trader may go long the GBPUSD on confirmation of an initial currency rally. A green five minute candle closing at 04:35 EST is the suggested buy signal, with stop-losses to be set below the pair?s preceding swing-lows.

The Sterling?s recent declines leave comparatively little room for further short-term depreciation, but a strongly negative Retail Sales report may nonetheless provide an opportunity for solid post-news trading profits. If numbers come significantly below expectations, look to go short the GBPUSD on confirmation of an initial bearish move. Stops should be limited to the pair?s immediate swing-highs, while profit taking shall be discretionary. We recommend looking for at least a 1:1 profit target to stop loss ratio. In other words, look to make at least as much as you are willing to risk.