Volatile Durable Goods Orders decline in July: DXY
Joe Perry August 25, 2021 11:05 AM
One of the reasons Durable Goods Orders is so volatile is because of new orders for aircraft.
Orders for large ticket items, such as aircraft and autos, fell by -0.1% MoM in July vs expectations of -0.3% and a reading of +0.8% in June. One of the reasons Durable Goods Orders is so volatile is because of new orders for aircraft. Boeing had a reduction in orders, which helped bring the headline number lower. It was the first contraction in 3 months. Excluding transportation, Durable Goods orders actually increased by 0.7%. However, without the governments help in the defense sector, the print would have been even worse, at -1.2%! The government increased their orders in defense spending by over 20%, which helped support the headline number.
The US Dollar Index, which had set a new high for the year last week, had been forming an ascending triangle. However, after testing the top trendline of the ascending wedge on Friday, the DXY began moving lower and broke below the bottom trendline yesterday. Notice that the RSI had been diverging with price as DXY put in the new high. Today, the index is trying to stage a recovery, however it is up against both horizontal resistance and the upward sloping trendline of the wedge near 93.14.
Source: Tradingview, FOREX.com
What is the US Dollar Index (DXY)?
So, will the DXY continue moving lower? A large part of this answer will be determined by Fed Chairman Powell’s speech at Jackson Hole on Friday. (Check out Matt Weller’s preview) The DXY had paused on its pullback near the 61.8% Fibonacci retracement level from the August 13th lows to the August 20th highs, near 92.95. From a technical standpoint, it appears as if the DXY could move lower. If the US Dollar Index can’t move above the 93.14 level, it will have formed a flag pattern. The target for a flag pattern is the length of the flagpole added to the breakdown point, which would be near 92.25. However, it must first get through support at the bottom of the flag at 92.80 and the August 13th lows at 92.47.
Source: Tradingview, FOREX.com
Although Durable Goods Orders data show a valuable part of business spending for a particular month, they tend to be volatile and sometimes may not be a good economic indicator for determining market direction. With Powell speaking on Friday at Jackson Hole, traders seem to have their attention focused on whether or not he will make a tapering announcement at that time. Traders will be positioning themselves ahead of Friday!
Learn more about forex trading opportunities.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.