U.S. retail sales are expected to have increased 0.4% in June after a 1% gain the month prior. Economists are predicting that Americans continued to spend their stimulus checks as the government has distributed $86.1 billion of the expected $100 billion planned. The majority of the gain may be tied to gasoline receipts as prices at the pump continue to skyrocket with the average price at $4.11 per gallon. Although, housing and inflation continue to weigh on consumers, their outlook has started to improve with the ABC and University of Michigan confidence reports printing better. However, the recent potential failures of the GSE’s Fannie Mae and Freddie Mac have reignited credit fears and the potential for a systemic failure. Treasury Secretary Hank’s Paulson has thrown the support of the U.S government behind the beleaguered lenders as he has gone to Congress for the authority to buy or finance almost half of the $12 trillion in mortgages on their balance sheets. The outcome from these efforts and the next course for the GSE’s may dominate the greenback’s course in the near-term. As long as the housing market fails to stabilize the U.S. economy, the dollar will continue to be suppressed. Pending home sales fell 4.7% and with Fannie and Freddie’s power to buy mortgages disintegrating, buyers will find it harder to come by mortgagees.

An expected rise in producer prices will cross the wires at the same time as the anticipated improvement in consumption. The combined bullish data may set the dollar up for a rally. Additionally, wholesales inventories have remained firm and with the broader than expected increases in sales last month consumers should continue those buying patterns. Therefore, for a long trade we would look for another 1% improvement in consumption. With a confirmed, strong release we will look for a five-minute red candle to confirm entry on two lots of EURUSD. Our initial stop will be set at the nearby swing low (or reasonable distance) and this risk will determine our first target. Our second target will be based on discretion (with a mind to significant support levels in the area) and to preserve profit we will move the stop on the second lot to break even when the first half of the trade reaches its target.

Alternatively ,the economy has lost jobs the past six months and the weak dollar has seen import prices rise 20.5% from a year ago, squeezing consumers from both sides. Additionally, a 50 cent rise in gas prices over the past two months may have curbed consumer spending. We will look for a contraction in consumption to trigger a long trade and follow the same strategy as the short above, just in reverse.

Jamie Saettele is a Technical Currency Analyst for FXCM.