US Retail Sales Data: A Crucial Test for Dollar Strength in Crypto Markets

The potential softening of data could challenge the narrative of "U.S. exceptionalism" and potentially weaken the dollar, setting the stage for a positive upswing in Bitcoin's price.

Following Monday's whirlwind in Bitcoin driven by ETF rumors, the focal point of Tuesday's American trading hours is likely to be the unveiling of U.S. retail sales data for September.

This consumer spending figure will provide insights into how consumers are navigating heightened borrowing costs within the economy and is likely to exert influence on the U.S. dollar index, historically a factor impacting the crypto market.

The U.S. Census Bureau is scheduled to release the September retail sales report on Tuesday, October 17, at 12:30 GMT. Economists are anticipating a month-on-month growth of 0.3% in September, following the 0.6% upswing in August, as reported by FXStreet. The core figure (excluding the automobile sector) is projected to have increased by 0.2%, following a 0.6% rise in August.

Analysts at ING anticipate potential pressure on the dollar in light of a softer retail sales figure. This dollar weakness could potentially lead to higher prices for Bitcoin and other risk assets.

Over the past three months, the dollar index, which gauges the value of the greenback against major fiat currencies, has surged by 6.7%. This surge is primarily attributed to the narrative of U.S. economic outperformance. The durable consumer spending in the U.S. has been a key driver of the bullish outlook for the dollar. However, Bitcoin has seen a 10% decline since its mid-July peak.

Commenting on this, ING analysts noted in a client brief early Tuesday:

 "Given that powerful U.S. growth and the U.S. 'exceptionalism' story has largely been based on the U.S. consumer staying in work and spending, a softer retail sales figure could test some of the late arrivals to the long dollar trade. That should mean that DXY will struggle to break 106.75 resistance and instead may end up pressing intra-day support at 106.00."

Analysts also pointed to U.S. industrial production, set for release at 13:15 UTC, as a potential source of market volatility.

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