- U.S. Durable Goods Orders to Rebound 0.6.% in March.
- Non-Defense Capital Goods Orders ex Aircrafts to Climb 0.3% After Contracting -1.4% in February.
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Trading the News: U.S. Durable Goods Orders
A 0.6% rebound in orders for U.S. Durable Goods may heighten the appeal of the greenback and spur a bearish retraction in EUR/USD as it raises the fundamental outlook for the world’s largest economy.
What’s Expected:
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Why Is This Event Important:
Signs of a stronger recovery may encourage bets for a mid-2015 Fed rate hike, but the recent slew of weaker-than-expected data prints may encourage the central bank to further delay its normalization cycle in an effort to combat the ongoing slack in the real economy.
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Expectations: Bullish Argument/Scenario
| Release | Expected | Actual |
|---|---|---|
| U. of Michigan Confidence (APR P) | 94.0 | 95.9 |
| Average Hourly Earnings (YoY) (MAR) | 2.0% | 2.1% |
| Personal Spending (FEB) | 0.3% | 0.4% |
Improved confidence paired with the uptick in wage growth may generate greater demand for large-ticket items, and a positive development may boost interest rate expectations as the Fed remains on course to remove the zero-interest rate policy (ZIRP).
Risk: Bearish Argument/Scenario
| Release | Expected | Actual |
|---|---|---|
| Consumer Price Index Core (YoY) (MAR) | 1.7% | 1.8% |
| Advance Retail Sales (MoM) (MAR) | 1.1% | 0.9% |
| Personal Spending (FEB) | 0.2% | 0.1% |
However, fading discounts along with the ongoing weakness in household spending may drag on orders for durable goods, and a dismal print may dampen the appeal of the greenback as it raises the Fed’s scope to retain its current policy beyond mid-2015.
How To Trade This Event Risk(Video)
Bullish USD Trade: Orders Rebound 0.6% or Greater
- Need to see red, five-minute candle following the release to consider a short trade on EURUSD
- If market reaction favors a long dollar trade, sell EURUSD 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 limit
Bearish USD Trade: Demand for Durable Goods Falter
- Need green, five-minute candle to favor a long EURUSD trade
- Implement same setup as the bullish dollar trade, just in the opposite direction
Potential Price Targets For The Release
EUR/USD Daily Chart
Chart - Created Using FXCM Marketscope 2.0
- Long-term outlook for EUR/USD remains bearish, but the triangle/wedge formation may .
- DailyFX Speculative Sentiment Index (SSI) shows the retail crowd remains net-short EUR/USD since March 9, with the ratio holding around -1.70.
- Interim Resistance: 1.0970 (38.2% expansion) to 1.0990 (50% retracement)
- Interim Support: 1.0487 (3/13 close) to 1.0515 (50% expansion)
Read More:
GBPJPY Breakout Eyes 181- Long Scalps Favored Above 179
NZD/USD Failure to Close Above 0.7700 Raises Risk for Near-Term Top
Impact that the U.S. Durable Goods report has had on EUR/USD during the last release
| Period | Data Released | Estimate | Actual | Pips Change | Pips Change |
|---|---|---|---|---|---|
FEB 2015 | 03/25/2015 13:30 GMT | 0.2% | -1.4% | -9 | -18 |
February 2015 U.S. Durable Goods Orders
Orders for U.S. Durable Goods unexpectedly shrank 1.4% in February following a revised 1.9% expansion the month prior. The contraction was largely drive by a drop in transportation, with demand for non-defense aircrafts slipping 8.9% from the previous month. The slowdown in private-sector consumption may become a growing concern for the Fed as lower energy costs fail to boost household spending, and the central bank may look to further delay its normalization cycle in an effort to encourage a stronger recovery. Despite the weaker-than-expected prints, the initial market reaction was rather limited as EUR/USD struggled to hold above the 1.1000 handle during the North American trade to end the day at 1.0973.
--- Written by David Song, Currency Analyst and Shuyang Ren
To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.
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