USD/JPY: Trading the US Retail Sales

US Retail Sales is considered one of the most important consumer indicators. It provides analysts and traders with a snapshot of consumer spending. A reading that is higher than the market forecast is bullish for the US dollar.

Here are all the details, and 5 possible outcomes for USD/JPY.

Published on Wednesday at 13:30 GMT.

 Indicator Background

Consumer spending is one of the most important components of the economy, and any unexpected readings in the Retail Sales indicator can affect the movement of USD/JPY.

Retail Sales has improved over the past two readings, with the January release rising to 0.5%.  However, the markets are expecting a weaker reading for February, with an estimate of a gain of only 0.1%.

Sentiments and levels

Japan continues to receive criticism from its trading partners over the plummeting yen is mounting, as the ECB also joined in. Mario Draghi hinted that Japan’s inflation goal of 2% is a stretch. With the G-20 summit at the end of the week, Japanese politicians are trying  to ease the tensions, and some have publicly stated that the yen depreciation was too fast. After this week, we will probably see a resumption of the rises: the Japanese economy is still weak, and the US yields still support the greenback. So, the overall sentiment is bearish on USD/JPY towards this release.

Technical levels, from top to bottom: 96.90, 95, 94.70, 93.75, 92.80 and 92.12.

5 Scenarios

1. Within expectations: 0.1% to 0.7%: In such a case, USD/JPY is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 0.8% to 1.1%: An unexpected higher reading can send the pair above one resistance line.
3. Well above expectations: Above 1.1%: Such an outcome would likely propel USD/JPY upwards, and a second resistance line might be broken as a result.
4. Below expectations: -0.3% to 0.0%: A zero or negative reading could push the pair below one level of support.
5. Well below expectations: Below -0.3%: In this scenario, the pair could fall and could break a second support level.

For more about the yen, see the USD/JPY.

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