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EUR/USD Risks Dip Below 1.3770 Pivot as U.S. Durable Goods Climb 2.0%

By , Currency Analyst  and Gregory Marks
24 April 2014 07:00 GMT

eur/usd risks dip below 13770

- U.S. Durable Goods Orders to Rise for Second Consecutive Month.

- Non-Defense Capital Goods Orders to Rebound Following 1.4% Decline in February.

Trading the News: U.S. Durable Goods Orders

Another 2.0% rise in orders for U.S. Durable Goods may generate a bullish reaction in the dollar as it raises the outlook for growth and inflation.

EUR/USD Risks Dip Below 1.3770 Pivot as U.S. Durable Goods Climb 2.0%EUR/USD Durable Goods Orders

Why Is This Event Important:

Data prints pointing to a stronger recovery may put increased pressure on the Federal Open Market Committee (FOMC) to normalize policy sooner rather than later, and we may see Fed Chair Janet Yellen soften her dovish tone for monetary policy as a growing number of central bank turn increasingly upbeat towards the economy.

Expectations: Bullish Argument/Scenario

Release

Expected

Actual

Advance Retail Sales (MAR)

0.9%

1.1%

U. of Michigan Confidence (APR P)

81.0

82.6

Consumer Credit (FEB)

$14.000B

$16.489B

The expansion in private sector credit along with the ongoing improvement in household sentiment may highlight increased demand for large-ticket items, and a positive development may foster a bullish outlook for the greenback as growth prospects improve.

Risk: Bearish Argument/Scenario

Release

Expected

Actual

Consumer Price Index (YoY) (MAR)

1.4%

1.5%

Average Hourly Earnings (YoY) (MAR)

2.3%

2.1%

Gross Domestic Product (Annualized) (QoQ) (4Q F)

2.7%

2.6%

However, subdued wage growth paired with the persistent slack in the real economy may continue to drag on private consumption, and a dismal Durable Goods report may heighten the bearish sentiment surrounding the greenback as it drags on interest rate expectations.

Join DailyFX on Demand for LIVE EUR/USD SSI Readings During the Event

How To Trade This Event Risk(Video)

Bullish USD Trade: Orders Climb 2.0% or Greater

  • Need to see red, five-minute candle following the print to consider a long dollar trade
  • If market reaction favors a short EUR/USD position, sell pair with two separate position
  • Set stop at the near-by swing high/reasonable distance from entry; look for at least 1:1 risk-to-reward
  • Move stop to entry on remaining position once initial target is hit; set reasonable objective

Bullish USD Trade: Demand for Large-Ticket Items Falter

  • Need green, five-minute candle to favor a short dollar trade
  • Implement same setup as the bullish USD trade, just in reverse

Potential Price Targets For The Release

EUR/USD Daily

EUR/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Remains in Bullish Trend, But Currently Stuck in Wedge/Triangle Formation
  • Interim Resistance: 1.3960-70 (61.8% expansion)
  • Interim Support: 1.3650 (78.6 expansion) to 1.3660 (23.6 retracement)

Impact that the U.S. Durable Goods Orders report has had on EUR/USD during the last release

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

FEB 2014

03/26/2014 13:30 GMT

0.8%

2.2%

-7

flat

February 2014 U.S. Durable Goods Orders

fomc meeting chart

With volatility at lows not seen since just before the financial crisis in the EUR/USD pair, it is no surprise that the last Durable Goods orders figure did not move markets substantially. The release came in at 2.2%, above market expectations calling for a 0.8% increase. In the context of yesterday’s disappointing housing print, we may see greater follow through if we do see the print diverge from market expectations of 2.0% for March.

--- Written by David Song, Currency Analyst and Gregory Marks

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

To be added to David's e-mail distribution list, please follow this link.

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24 April 2014 07:00 GMT