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Deceivingly Strong September Durable Goods Fail to Lift US Dollar

Deceivingly Strong September Durable Goods Fail to Lift US Dollar

Christopher Vecchio, CFA, Senior Strategist

Talking Points:

- Headline figure beats, but underlying trend suggests weakening economy.

- Threat of government shutdown in October likely impacted business confidence.

- Following the release, AUDUSD rallies back towards $0.9600.

A misleading headline Durable Goods Orders report for September stoked some initial upside in the US Dollar, but a closer look at the numbers has since dampened optimism. Indeed, when removing the obtuse nondefense aircraft order figures (+57.5% m/m in September) and transportation orders in general, US consumption trends for larger-scale purchases appear to be waning.

The overall soft report adds further evidence to the idea that the Federal Reserve will not taper QE3 at its policy meeting next week. While the US government shutdown and ensuing debt debate may have been the first sign of a non-taper, recent US economic data, including the disappointing September NFP report and today’s Durable Goods Orders, point to a slowing economy as the summer months wound down.

Here’s the data hurting the US Dollar:

- Durable Goods Orders (SEP): +3.7% versus +2.3% expected, from +0.2% (revised higher from +0.1%) (m/m).

- Durables ex Transportation (SEP): -0.1% versus +0.5% expected, from -0.4% (revised lower from -0.1%) (m/m).

AUDUSD 1-minute Chart: October 25, 2013

Deceivingly_Strong_September_Durable_Goods_Fail_to_Lift_US_Dollar_body_x0000_i1027.png, Deceivingly Strong September Durable Goods Fail to Lift US Dollar

Charts Created using Marketscopeprepared by Christopher Vecchio

Following the bearish US economic data, the US Dollar slipped against its major counterparts, with risk appetite notably picking up on the figures. The AUDUSD initially dropped from $0.9587 to as low as 0.9584, but soon turned around and rallied to as high as 0.9598. Similar modest rallies against the US Dollar were evident in the British Pound, the Euro, and the Japanese Yen; the Dow Jones FXCM Dollar Index (Ticker: USDOLLAR) dropped by -0.04% on the data.

--- Written by Christopher Vecchio, Currency Analyst

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