Crypto Day Ahead: U.S. Retail Sales Data to Test Dollar Buoyancy

After Monday's ETF rumor-led whirlwind in bitcoin, the highlight of Tuesday's American trading hours is likely to be the release of the U.S. retail sales data for September.

The consumer spending figure will reveal how consumers are coping with elevated borrowing costs in the economy and likely influence the U.S. dollar index, which has historically had a bearing on the crypto market.

The U.S. Census Bureau will release the September retail sales report on Tuesday, October 17, at 12:30 GMT. Economists expect a month-on-month gain of 0.3% in September following August's 0.6% increase, according to FXStreet. The core figure (exclusive of the automobile sector) is forecast to have risen 0.2% following August's 0.6% rise.

Analysts at ING expect the dollar to come under pressure on a potential softer retail sales figure. The weakness in the dollar could translate into higher prices for bitcoin and other risk assets.

The dollar index, which tracks the greenback's value against major fiat currencies, has surged by 6.7% in the past three months, mainly based on the U.S. economic outperformance story. The resilient U.S. consumer spending has primarily powered the dollar-bullish narrative. Bitcoin is down 10% since mid-July high.

"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," ING analysts said in a note to clients early Tuesday.

Analysts also cited U.S. industrial production, scheduled for release at 13:15 UTC, as a possible source of volatility in markets.