The last big data hit before the interest rate decision! Can strong data save the dollar?

As markets and economists await this week's update on housing and retail salessellThe data came as consumer confidence rose sharply in July, signalling another soft landing for the U.S. economy.

US retail sales in JunesellIt will be announced at 20:30 Beijing time on Tuesday, May retailsellMild improvement.The market expects retail sales in JunesellThe monthly rate will increase by 0.5%, a further improvement from the previous value of 0.3%.

Consumers are still spending the savings they accumulated during the epidemic, and as inflation cools, recent wage increases are helping Americans make ends meet and have a little money to spare.

Wells Fargo economists wrote on Sunday, "Households do still have the means to spend, and we expect consumption to continue during the summer months"We expect consumption to pick up, with retail sales up 0.5% in June, as the industry continues to normalizesellIt will be boosted again. "

They added, "After several months ofsellAfter weak growth, we expect some return on spending on goods. But as real income growth shows signs of slowing amid falling savings and a credit crunch,We are somewhat inclined to view growth in the coming months as a low-base effect rather than retailsellBeginning to show signs of sustained growth”。

US Retailsellor nowStronger growth

retailsellThe data are a good reflection of consumer demand and will merit closer analysis as July's FOMC meeting approaches. ButXM Research said that even if expectations are encouraging, the report alone may not be enough to reverse the free fall of the dollar since last week.

The lower-than-expected U.S. CPI inflation data did little to affect interest rate hike expectations this year, but added more credibility to claims of a rate cut in 2024, sending the dollar index below the psychological level of 100 and to its lowest level in 15 months.

Before next week's FOMC policy meeting,Fed policymakers have entered a period of silence.Therefore, they cannot use public information to reshape market expectations for rate cuts and rescue the dollar again.This makes US retailsellInitial jobless claims and monthly housing data were the only factors likely to affect the market ahead of the meeting.

Analysts expect month-on-month growth to accelerate slightly to 0.5% from 0.3% previously.If realized, it would be the second fastest growth in retail sales this year, excluding carssellThe core measure is expected to grow to 0.3% from 0.1% previously. The rebound in the data could mean consumption remains resilient as the economy heads into the second half of 2023, after Federal Reserve policymakers predicted a relative slowdown in economic growth through the second half of 2023.

retailsellThe annual trend is not optimistic

On an annualized basis, retail sales have fallen sharply this year. Excluding data during the pandemic slump,Growth in April fell to its slowest pace in three years, at 1.20 percent, and rose only modestly to 1.6 percent in May.Perhaps slowing inflation and a stabilizing job market could prompt some extra spending in the summer months, as conveyed by the University of Michigan's latest bullish preliminary reading on consumer confidence.However, the monthly rebound may not change the overall weakening trend。

Therefore,The market's reaction to the data may not be too extreme, but if the data is better than expected, there may be a temporary upside correction for USD/JPY. The resistance area of 140.00-141 may limit the upside strength before resistance 142.00. Conversely, disappointing reports may strengthen interest rate cut expectations, and if the pair subsequently falls below the 138.00-137 support area, then the sell-off may continue towards the 200-day exponential moving average and the 2023 support trendlines 136.35 and 135.35.

PepperstoneStoneAnalysts believe that from a technical analysis point of view, the dollar index is likely to fall to a height of around 97.5, which doubles the triangle. The dollar index has now reversed nearly three-quarters of the gains recorded between January and September last year. There is still room for the dollar to decline further for the rest of the year.

But they believe that looking at important economic data, U.S. retail sales on TuesdaysellThe data has little impact. Even if the data is good and exceeds expectations, it will be difficult to reverse the trend in the face of such a strong short-term decline, and the probability of a small correction is higher.Industrial foreign exchangeRemind you that investment is risky, and the above analysis is for reference only!