Uncle Sam is about to drop its retail sales figures for the month of December!
What are the markets expecting and how might the report affect USD/JPY’s uptrend?
Before moving on, ICYMI, yesterday’s watchlist looked at EUR/AUD’s trend line support ahead of China’s data dump. Be sure to check out if it’s still a good play!
And now for the headlines that rocked the markets in the last trading sessions:
Fresh Market Headlines & Economic Data:
China’s GDP grew by 5.2% in 2023, higher than the government’s 5.0% goal and Q3’s 4.9% annual growth
China’s industrial production for December: 6.8% y/y (6.6% y/y expected and previous)
China’s fixed asset investment for December: 3.0% ytd/y (2.9% ytd/y forecast and previous)
China’s unemployment rate ticked higher from 5.0% to 5.1% in December
China’s retail sales slowed down from 10.1% y/y to 7.4% y/y in December
Reuters’ Tankan poll showed morale among big Japanese manufacturers slid for the first time in four months in January, down from +12 to +6; the Non-manufacturing index improved from +26 to +29
U.K.’s inflation unexpectedly picked up in December – The annual CPI is up from 3.9% to 4.0% (3.8% expected); core CPI remained at 5.1% (4.9% expected)
U.K.’s PPI input in December: -1.2% m/m (-0.6% m/m forecast, -0.4% m/m previous); PPI output at -0.6% m/m (-0.2% m/m forecast, 0.0% m/m previous)
ECB President Lagarde: Aggressive rate cut bets “are not helping” the ECB’s fight against high inflation
Price Action News
Overlay of AUD vs. Major Currencies Chart by TradingView
Risk aversion remained the name of the game during the Asian and early European session trading.
Recent headlines didn’t help. China’s annual growth slightly missed market estimates while retail activity rose the slowest in three months in December.
Meanwhile, European Central Bank (ECB) President Lagarde shared that aggressive rate hike speculations are “not helping” the ECB’s fight against high inflation, which added to bets that the markets need to tweak their prices to reflect fewer or at least less aggressive rate cuts from the major central banks.
Not surprisingly, the China-related AUD took hits from the weak(ish) Chinese data and overall risk aversion.
AUD is trading in the red across the board, with the deepest losses recorded against GBP and USD while the least losses are seen against NZD and JPY.
Upcoming Potential Catalysts on the Economic Calendar:
U.K.’s house price index at 9:30 am GMT
Eurozone’s final December CPI at 10:00 am GMT
U.S. retail sales at 1:30 pm GMT
FOMC member Michael Barr to give a speech at 2:00 pm GMT
FOMC member Michelle Bowman to give a speech at 2:00 pm GMT
U.S. industrial production at 2:15 pm GMT
ECB President Lagarde to give a speech at 3:15 pm GMT
Japan’s core machinery orders at 11:50 pm GMT
Australia’s MI inflation expectations at 12:00 am GMT (Jan 18)
Australia’s labor market data at 12:30 am GMT (Jan 18)
Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action! ️
USD/JPY: 15-min
USD/JPY 15-min Forex Chart by TradingView
In a few hours, we’ll see the U.S. December retail sales report. Word around is that we’ll see slightly slower activity, with annual retail activity ticking lower from 4.1% to 4.0% while core retail activity keeps its 0.2% uptick.
Higher retail numbers would likely give traders one more reason to buy the U.S. dollar. In case you’re just starting your week, the Greenback has been making pips rain as some traders adjust their expectations to reflect fewer interest rate cuts or at least a longer period before the first rate cut from the major central banks.
Meanwhile, the Japanese yen is finding it hard to get traction from the risk aversion. Japan has also recently printed spotty economic activity reports, which doesn’t give JPY bulls confidence.Can USD/JPY extend its January uptrend today?
The pair seems to have found resistance from the R1 (147.80) Pivot Point line despite early European session players still feeling the overall risk aversion.
The 147.00 – 147.30 area of interest may draw in bulls if we do see USD/JPY pull back to the level. As you can see, it’s close to the trend line and 100 SMA support in the 15-minute time frame.
If USD/JPY finds support in the area, then we may see the pair revisit its weekly highs near 148.80. USD/JPY may even hit new intraweek highs if there’s a fresh fundamental catalyst for more USD gains.
Watch the U.S. retail sales report and the overall risk sentiment picture to see if (a) USD/JPY can drop down all the to the trend line zone before finding support or if (b) USD/JPY will find enough fundamental and technical momentum to extend its January downtrend.
Good luck and good trading, errbody!
