Currently, the retouch tool only does a very weak, 1-pixel version of Smudge. It may be eventually improved, but until then, you can use a more universal technique shown here.
Tips for controlled blur / smudge?
Trying to hide a seam.
Is there a trick that works as well as the Photoshop Smudge tool? I'm trying to hide a seam after sticking two photos together.