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Upbeat U.S. Durable Goods Orders Report to Curb EUR/USD Resilience

Upbeat U.S. Durable Goods Orders Report to Curb EUR/USD Resilience

David Song, Strategist

- U.S. Durable Goods Orders to Rebound 3.5% in June.

- Non-Defense Capital Goods Orders Excluding Aircrafts to Increase for Third Month.

-DailyFX 3Q Forecasts Are Now Available.

Trading the News: U.S. Durable Goods Orders

U.S. Durable Goods Orders

Increased demand for U.S. Durable Goods may spark a bullish reaction in the greenback as the Federal Open Market Committee (FOMC) appear to be on course to unload the balance sheet later this year.

Why Is This Event Important:

May positive development may encourage Chair Janet Yellen and Co. to adopt a more hawkish tone especially as ‘the Committee expects to begin implementing its balance sheet normalization program relatively soon, provided that the economy evolves broadly as anticipated.’ In turn, the U.S. dollar may exhibit a more bullish behavior ahead of the next rate decision on September 20, but another series of weaker-than-expected data prints may generate a bearish reaction in the greenback as it dampens bets for three Fed rate-hikes in 2017.

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

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

MAY P

2017

06/26/2017 12:30:00 GMT

-0.6%

-1.1%

+20

-7

May 2017 U.S. Durable Goods Orders

EUR/USD 15-Minute

EUR/USD Chart

Orders for U.S. Durable Goods slipped another 1.1% in May after contracting a revised 0.9% the month prior. A deeper look at the report showed orders for Non-Defense Capital Goods Excluding Aircrafts, a proxy for business investment, unexpectedly fell 0.2% during the same period amid forecasts for a 0.4% rise. The U.S. dollar struggled to hold its ground following the report, with EUR/USD spiking to 1.1220, but the market reaction was short-lived as the pair closed the day at 1.1182.

How To Trade This Event Risk(Video)

Bullish USD Trade: Orders Increase 3.5% or Greater

  • Need a red, five-minute candle subsequent to the release to favor a short EUR/USD position.
  • If the market reaction favors a bullish dollar trade, sell EUR/USD with two separate lots.
  • Set stop at the near-by swing high/reasonable distance from entry; look for at least 1:1 risk-to-reward.
  • Move stop to breakeven on remaining position once initial target is met, set reasonable limit.

Bearish USD Trade: Demand for Large-Ticket Items Fall Short of Market Forecast

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

Potential Price Targets For The Release

EUR/USD Daily

EUR/USD Daily Chart

Chart - Created Using Trading View

  • The market reaction to the FOMC July interest rate decision keeps the near-term outlook tilted to the topside as EUR/USD makes a more meaningful attempt to close above the 1.1670 (78.6% expansion) hurdle, while the Relative Strength Index (RSI) sits in overbought territory.
  • In turn, a break of the August 2015-high (1.1714) may open up the next topside region of interest around 1.1810 (61.8% retracement) to 1.1860 (161.8% expansion)
  • Interim Resistance: 1.1810 (61.8% retracement) to 1.1860 (161.8% expansion)
  • Interim Support: 1.0980 (50% retracement) to 1.1020 (50% expansion)

--- Written by David Song, Currency Analyst

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

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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