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US Retail Sales Up Next 

Today’s US retail sales will be the next key input for USD traders. On the back of a bumper January jobs report and a fresh uptick in inflation, the market is expecting retail sales to have bounced back from the weakness seen in December. Amidst a slew of fresh hawkish comments from Fed members yesterday, USD looks primed for further upside today if the data satisfies or beats forecasts.
 

Market Forecasts

On the numbers front, consensus forecasts are built around 0.9% for the core figure, up from -1.1% prior, and 1.9% for the headline figure, up from -1.1% prior. If such a rebound is confirmed, particularly if we see any upside surprise, USD should continue higher across the back end of the week, with a focus then turning to PPI data tomorrow. Resilience in the US economy, particularly coupled with a fresh jump in inflation, is supporting the view that the Fed will continue with hikes for longer than expected this year, keeping USD supported near-term.
 

Where to Trade?

USDJPY looks like a good candidate to express USD longs given that JPY is currently suffering from uncertainty regarding the upcoming change in BOJ leader. Incoming BOJ chief Ueda has previously warned against the dangers of hiking rates too soon and so there are fears that he will be a dove, keeping JPY pressured for now.
 

Technical Views

USDJPY

(Click on image to enlarge)

Following bearish divergence into the lows, USDJPY has now broken out above the bear channel top and is attempting to break above the 132.91 resistance level. This is a key pivot for the pair and above here, focus turns to a test of the 139.33 level next. Retail market is around 60% short currently, showing there is plenty of room for a breakout to develop as this position grows. 

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