TheNews

- 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.

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:



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.

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

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
EURUSD Daily Chart

• Long-term outlook for EUR/USD remains bearish, but the triangle/wedge formation may .
• Interim Resistance: 1.0970 (38.2% expansion) to 1.0990 (50% retracement)
• Interim Support: 1.0487 (3/13 close) to 1.0515 (50% expansion)

Impact that the U.S. Durable Goods report has had on EUR/USD during the last release

Period	Data Released	Estimate	Actual	Pips Change (1 Hour post event )	Pips Change (End of Day post event)
FEB 2015	03/25/2015 13:30 GMT	0.2%	-1.4%	-9	-18

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


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