US Dollar Steady After Durable Goods Orders, but Japanese Yen Gains

THE TAKEAWAY:US Durable Goods Orders (MAY) > Manufacturing Outlook Improving, but Revisions Suggest Manufacturing Weaker than Previously Thought > USDJPY Bearish

Concerns in the near-term that US manufacturing has been declining were abated today, when the May Durable Goods Orders report showed its strongest reading since February. The report showed that orders grew by 1.1 percent in May against an expectation of 0.5 percent, according to a Bloomberg News survey. Considering that growth concerns in the United States have been exceptionally high recently – especially in the wake of the very disappointing May Nonfarm Payrolls report – but this should put those on the sidelines for at least a few days.

While the headline print was strong, the underlying components were fairly disappointing. Orders ex Transportation only increased by 0.4 percent against a forecast of growth of 0.7 percent, and the April figure was revised lower to a contraction of 0.6 percent. What this suggests it that American consumers, accounting for approximately 70 percent of the headline growth figure, have trimmed their purchases of more expensive goods. Thus, while the overall report looks bright, there are still some ‘storm clouds’ on the horizon.

USDJPY 1-min Chart: June 27, 2012

Charts Created using Marketscope – Prepared by Christopher Vecchio

While the US Dollar traded mostly sideways following the report (first depreciating against the AUD, CAD, and EUR before rallying back against each), the Japanese Yen firmed up immediately after across the board. The USDJPY dropped by approximately 8-pips following the release; but the Yen’s strength was more pronounced elsewhere. The AUDJPY dropped by 18-pips from 80.30 to 80.12, at the time this report was written; while the CADJPY fell back from session highs of 77.80 to 77.63, at the time this report was written.

--- Written by Christopher Vecchio, Currency Analyst

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