US Retail Sales Up Next

US Retail Sales will be the key data focus today and the release is likely to draw extra attention ahead of the June FOMC this week. Following the flat headline reading and -0.8% core reading over the prior month, the market is looking for a -0.6% headline reading and 0% core reading over May. With this in mind, the potential for a firm upside move in USD In response to any positive surprise, is high. Following the better-than-expected inflation reading for May, if today’s data comes in strong, this is likely to cement hawkish Fed expectations into the FOMC tomorrow, sending USD higher. If the data undershoots expectations, however, USD is likely to remain subdued with traders expecting a more reserved tone from the central bank.

Where to Trade US Retail Sales?

AUDUSD

Following the correction lower from the .80 level highs, AUDUSD has settled into a range between the .7683 level support and .7824 level resistance. The broader structure can be viewed as a shallow head and shoulders, suggesting the potential for a break lower, in line with the break of the bullish trend line from last year’s lows.

If todays US data is strong (and the FOMC seen as hawkish), this could start USD on the path higher. The subsequent pullback in equities and commodities prices would hit AUD, creating room for the pair to break below .7683, targeting .7564 and .7413 thereafter.