USD/JPY traders watch out: US Retail Sales may trigger a sharp drop

Februar 14, 2020 11:30

Source: Economic Events February 14, 2020 - Admiral Markets' Forex Calendar

As we approach the weekly close, forex traders around the globe will certainly keep an eye on today's US Retail Sales numbers at 1330 GMT.

Particularly interesting will the data set be for the USD/JPY, which has shown some interesting developments over the last days.

Not only were the US yields unable to profit from solid US economic data last week, but the subdued reaction to Fed chairman Powell's neutral (and thus in our opinion, USD-bullish) comments at his semi-annual testimony does not bode well for the USD/JPY.

Certainly, the USD/JPY went for another stint up to 110 the last days, mainly driven by rising risk appetite among market participants, particularly in Equity markets, thus driving the Carry trade funding currency JPY lower.

But the fact that the comments from Powell fell on deaf ears among market participants who still expect, with a likelihood of around 80%, the Fed to cut rates at least once by 25 basis points in 2020 (according to the Fed Watch Tool and as of last Thursday), means: if US Retail Sales disappoint today, a sharper drop lower and bounce against 110.00 in the USD/JPY seems likely.

On the other hand, even a better than expected print should be carefully reviewed, any push above 110.00 in the USD/JPY may be short-lived with the USD/JPY finding a stronger zone of resistance around 110.30/70:

Source: Admiral Markets MT5 with MT5-SE Add-on USD/JPY Daily chart (between December 4, 2018, to February 13, 2020). Accessed: February 13, 2020, at 10:00pm GMT - Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2015, the value of the USD/JPY increased by 0.5%, in 2016, it fell by 2.8%, in 2017, it fell by 3.6%, in 2018, it fell by 2.7%, in 2019, it fell by 0.85%, meaning that after five years, it was down by 9.2%.

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