FOREX ASIA UPDATE - USD

The US dollar finished slightly weaker on Friday despite a strong retail sales report, with EURUSD trading up to a high of 1.2945 from a low of 1.2865, while USDJPY traded between 120.16 and 120.65.

Retail sales for December were released on Friday and rose by a strong 0.9% m/m, stronger than market expectations of a rise of 0.7% m/m.

While US markets are closed today for the Martin Luther King holiday, this is actually a very busy week for market data and events.

On the data side PPI, industrial production and the TIC report are due on Wednesday, jobless claims, CPI and Philly Fed on Thursday and the Uni of Michigan consumer sentiment index is due on Friday.

There are a number of Fed speakers this week too, with Bernanke testifying before the Senate Budget Committee on Thursday and Yellen, Poole, Pianalto, Lacker and Hoenig also speaking at various events.

Amid all this, Fed Chairman Bernanke seems unlikely to signal anything other than the "vigilant but on-hold" message adopted by the Fed over the past few months.

The implication is that we will need to be patient in trading our bearish USD targets although we remain of the view that economic data in the US will slow over coming months, and the risks are still biased towards the Fed cutting rates much earlier than current market expectations.