EURUSD Capped by 50-Day SMA Ahead of the Durable Goods Orders Report

Fundamental Outlook

Durable goods orders are forecasted to climb 3.0 percent in July after falling 1.2 percent the previous month, and the expected advance will mark the first rise since April. Indeed, the anticipated rise contradicts recent reports that showed that manufacturing slowed. However, the surge will likely be attributed to the jump in Boeing orders over the month as the world’s leading aerospace company and the largest manufacturer of commercial jetliners and military aircraft combined increased orders to 130 from 49. Excluding transportation, figures are predicted to push 0.5 percent higher, according to the 47 economists surveyed by Bloomberg News. Market participants will keep a close eye on capital goods data as it will show the growth of investment among businesses. As of late, the sub index has decreased three times in the previous five months. Despite the projected increase, durable goods may come under pressure in the ending months of this year as consumers remain skeptical about the economic outlook as they face a high unemployment rate, tight credit conditions, diminished home equity, and subdued wage growth. All in all, with the expected surge in Boeing orders, a reading less than 2 percent may add further weight on the U.S. dollar following the plunge in existing home sales today.

Technical Outlook

EUR/USD: After breaking below the narrow range at approximately 1.3100, the pair recently slipped below the broader range and now looks poised to test 1.2500 for support. At the same time, upside potential looks to be capped at the 50-day moving average, while the 10-day SMA looks poised to crossover below the longer trending 100 day average, which is indicative of additional declines.

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Written by Michael Wright, Currency Analyst

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