High US Retail Sales expectations – The USD/JPY set to test 108?

FX:USDJPY   U.S. Dollar / Japanese Yen
After the Fed rate decision last Wednesday, we want to concentrate on the USD/JPY and the upcoming release of US Retail Sales data into the weekly close.

The Fed, as expected, didn't announce a rate cut, and presented a 'balanced' statement, the Fed dot plot likewise signalled no interest rate changes in 2020, and the Fed Watch Tool remained at an expectation of around 60% of at least one 25 basis point cut for 2020, which resulted in subdued volatility in the USD/JPY , US Retail Sales could change that today.

Last month, US retail trade rose 0.3 percent from a month earlier, reversing a 0.3 percent drop in September and beating market expectations of 0.2 percent. The rebound in trade was driven by motor vehicle sales and higher gasoline prices, but expectations of 0.5% seem a little too optimistic and any disappointment could push the Greenback lower.

In addition to that, comments from the BoJ on Wednesday stated that it expects a sizable impact from the economic package from prime minister Shinzo Abe and that the BoJ could, as a result, modify its GDP forecast in January.

That said, we remain cautious in regards to an overly bearish USD/JPY outlook into the weekly, but also yearly close (probably especially with the current erratic developments around the trade 'deal' between the US and China and open question whether and how US tariffs on Chinese goods from December 15, will go into effect), but still consider the USD/JPY an attractive Short candidate with a first target on the downside around 108.00 where a break lower activates 106.80/107.00.

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