What's wrong with my SSRS XML File report?

Problem: The file name is Test.xml and I cannot get it to integrate as datasource and query it in my ssrs report.

Below is the contents of the XML file:

<Query>
  <XmlData>
    <Root>
      <ID RecordID="1">
        <Name>TRIF</Name>
        <Target>1.08</Target>
        <YTD>2.4</YTD>
        <FY_FCST>1.2</FY_FCST>
        <Comments>6 Incidents YTD; 3 Snow and Ice related - excluded TRIF = 1.20; No further incidents TRIF est. 1.20; May 8 - reported June 17: Potential Recordable potential Chemical exposure - fume hood; improper PPE - Investigating.</Comments>
      </ID>
      <ID RecordID="2">
        <Name>SIF</Name>
        <Target>0.33</Target>
        <YTD>0.4</YTD>
        <FY_FCST></FY_FCST>
        <Comments>1 SIF YTD (Back injury - slip from ladder); 3 SIF Near Miss - LOTO related 2 in JF1 and 1 NE Gas Property;</Comments>
      </ID>
      <ID RecordID="3">
        <Name>Name 3</Name>
        <Target></Target>
        <YTD></YTD>
        <FY_FCST></FY_FCST>
        <Comments></Comments>
      </ID>
      <ID RecordID="4">
        <Name>Name 4</Name>
        <Target></Target>
        <YTD></YTD>
        <FY_FCST></FY_FCST>
        <Comments></Comments>
      </ID>
      <ID RecordID="5">
        <Name>Name 5</Name>
        <Target></Target>
        <YTD></YTD>
        <FY_FCST></FY_FCST>
        <Comments></Comments>
      </ID>
    </Root>
  </XmlData>
</Query>

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Steps performed in SSRS
1. Create the datasource in report manager as Test_local
        http//localhost/temp/Test.xml
2. In designer I create the datasource as Test_local
3. In designer I create the dataset
      -Select the datasource Test_local
      - In the query window I type <Query />
4. Execute Query Designer.

At this point I receive an error "Failed to perpare web request for the specified URL.(mscorlib)

Also, If I copy the text from the file and run it as code in the query window it runs successfully.