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US Durable Goods Orders preview: activity seen easing in July

  • Expect a stronger reaction in equities than in currencies, and the latest trading accordingly to the firsts.
  • USD dollar out of market favor, larger market reaction foreseen on a negative outcome.

The US will release July Durable Goods Orders report this Thursday, a closely watched report amid it being an early indicator of future economic health.  The market understands that new orders from business and consumers, reflect trust in economic developments.

Analysts expect Orders to have decreased by 0.5% when compared to July, while the monthly core reading, which excludes transportation, is expected to post a 0.5% advance. June´s solid readings were downwardly revised, but remained above the historical average, with final June figures being 0.8% and 0.2% respectively.

 As it happens with many other reports, the market reacts to wide divergences between the outcome and the forecasted numbers, but in the particular case of Durable Goods Orders, and given that it tends to be volatile and subject to sharp revisions, attention centers in moving averages rather than figures. That said, the initial reaction to headers could be quickly erased once speculative interest digest the impact on future economic developments.

The dollar has been under pressure for over a week now and attempts to recover ground have been quite shallow, as political woes are clearly weighing more than macroeconomic headlines. Therefore, the release could have a temporal effect on major pairs.

A stronger reaction could be seen in equities,  usually more sensitive to this report. If the numbers result worse-than-expected, Wall Street should suffer and then, the best pair to trade will be the AUD/USD, as the Aussie is among the weakest and tends to fall alongside with equities. If the report posts an upbeat result, equities will probably surge, fueling an advance in high-yielding EUR and weighing on safe-haven JPY.

Author

Valeria Bednarik

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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