USD/EUR Extends Gains after Business Inventories Flatted in October

THE TAKEAWAY: U.S. Business Inventories Flatted In October > Gains in Wholesale and Retail Stockpiles Compensated Declines in Manufacturing Stockpike> USD/EUR Extends Gains

Business inventories, a measure of monthly percentage changes in inventories from manufactures, retailers and wholesalers in the U.S., registered no gain in October for the first time since January 2010. A report released by the Commerce Department today showed that business inventories flatted at end-of-month level of $1,532 billion in October, missing consensus forecast of 0.1 percent gain from Bloomberg survey. From a year prior, unsold goods held by businesses climbed 9 percent, though. Besides, August figure was revised downward to a gain of 0.4 percent from 0.5 percent.

U.S. Business Inventories, Monthly Change: January 2009 to Present

Prepared by Trang Nguyen

Business inventories failed to advance in September since declines in wholesale and retail stocks compensated gain in manufacturing stocks. In specific, adjusted wholesale inventories fell 0.1 percent to $451.4 billion from $452.7 billion in August while adjusted retail inventories declined 0.1 percent to $401.2 billion from $403.1 billion. Firms reduced their stockpiles of nondurable goods including petroleum, clothing and farm products. Manufacturing stockpiles, in contrast, rise 0.1 percent to $452.7 4 billion from $451.4 billion in the preceding month. As the combined value of distributive trade sales and manufacturer’s shipment moved up 0.6 percent, the October business inventory/sales ratio declined to 1.27. Coupled with rising sales in the month, declining inventories is indicative of faster pace of economic growth that triggers higher production to replenish stockrooms for businesses.

EUR/USD 1-minute Chart: November 15, 2011

Charts created using Strategy Trader– Prepared by Trang Nguyen

The one-minute EURUSD chart above showed that the currency pair decreased approximately 60 pips from 1.3560 to 1.3500 after the report issued. The greenback extends gains versus the single-currency because flat business inventories in October did not reflect deteriorated personal consumption. TheRelative Strength Indicatorfalling below 30 for the third time following the release signaled that foreign exchange traders massively selling the euro while gaining dollar holdings in their portfolios. At the time this report was written, the euro traded at 1.3503 U.S. dollars. As concerns on Eurozone crisis contagion spreading to Italy and Spain deepened, the greenback has obviously been one of safe heaven options for market participants to hunt for.

--- Written by Trang Nguyen, DailyFX Research Team for DailyFX.com

To contact Trang, email tnguyen@dailyfx.com