Dismal US Durable Goods Report to Delay Fed Liftoff? EURUSD Eyes 1.15
- U.S. Durable Goods Orders to Contract for Second Consecutive Month.
- Non-Defense Capital Goods Orders ex Aircrafts to Rebound 0.5%.
For more updates, sign up for David's e-mail distribution list.
Trading the News: U.S. Durable Goods Orders
Another 1.0% contract in demand U.S. Durable Goods may dampen the appeal of the greenback and generate a near-term advance in EUR/USD as ongoing slack in the real economy raises the risk for a further delay in the Fed’s liftoff.
Click Here for the DailyFX Calendar
Why Is This Event Important:
Fears of a slower recovery may encourage a growing number of Fed officials to adopt a more dovish tone for monetary policy, and we may see the Federal Open Market Committee (FOMC) retain the zero-interest rate policy (ZIRP) throughout 2015 in order to mitigate the downside risks for growth and inflation.
Join DailyFX on Demand for LIVE SSI Updates!
Expectations: Bearish Argument/Scenario
|Housing Starts (MAY)||-4.0%||-11.1%|
|Industrial Production (MoM) (MAY)||0.2%||-0.2%|
|Factory Orders (APR)||-0.1%||-0.4%|
The Fed may continue to trim the 2015 GDP forecast amid the mixed batch of data coming out of the U.S. economy, and another contraction in orders for large-ticket items may push the central bank to further delay the normalization cycle in an effort to encourage a stronger recovery.
Risk: Bullish Argument/Scenario
|Consumer Price Index Core (YoY) (MAY)||1.8%||1.7%|
|Advance Retail Sales (MoM) (MAY)||1.2%||1.2%|
|Average Hourly Earnings (YoY) (MAY)||2.2%||2.3%|
On the other hand, discounted prices paired with the pickup in private-sector wages may foster greater demand for U.S. Durable Goods, and a positive development may keep the Fed on course to raise the benchmark interest rate later this year as the central bank remains confident in achieving its dual mandate for full-employment and price stability.
How To Trade This Event Risk(Video)
Bearish USD Trade: Orders Contract Another 1.0% or Greater
- Need to see green, five-minute candle following the release to consider a long trade on EURUSD
- If market reaction favors a bearish dollar trade, buy EURUSD with two separate position
- Set stop at the near-by swing low/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
Bullish USD Trade: Demand for Large-Ticket Items Exceed Market Expectations
- Need red, five-minute candle to favor a short EURUSD trade
- Implement same setup as the bearish dollar trade, just in the opposite direction
Potential Price Targets For The Release
Chart - Created Using FXCM Marketscope 2.0
- Long-term outlook for EUR/USD remains bearish amid the deviation in the policy outlook, but the single currency remains at risk for a relief bounce as European policy makers work to keep Greece within the monetary union.
- DailyFX Speculative Sentiment Index (SSI) shows the retail crowd remains net-short EUR/USD since March 9, with the ratio holding near extremes as it sits at -2.12.
- Interim Resistance: 1.1510 (61.8% expansion) to 1.1532 (February high)
- Interim Support: 1.0970 (38.2% expansion) to 1.1000 (50% retracement)
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|
|05/26/2015 12:30 GMT||-0.5%||-0.5%||-22||-53|
February 2015 U.S. Durable Goods Orders
Orders for U.S. Durable Goods slipped 0.5% in April after expanding a revised 5.1% the month prior, while Non-Defense Capital Goods Orders excluding Aircrafts, a proxy for future business investments, increased 1.0% during the same period amid forecasts for a 0.3% expansion. A deeper look at the report showed demand for Transportation equipment slipped 0.3% during the month, with orders for electrical equipment falling 0.6%, while demand for machinery increased another 1.0% after climbing 0.1% in March. Despite the limited market reaction to mixed batch of data, the greenback gained ground throughout the North American trade, with EUR/USD slipping below the 1.0900 handle to end the day at 1.0869.
--- Written by David Song, Currency Analyst
To contact David, e-mail firstname.lastname@example.org. Follow me on Twitter at @DavidJSong.
To be added to David's e-mail distribution list, please follow this link.
Trade Alongsidethe DailyFX Team on DailyFX on Demand
Looking to use the DailyFX Trade Signals LIVE? Check out Mirror Trader.
New to FX? Watch this Video
Join us to discuss the outlook for the major currencies on the DailyFXForums
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.