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Dollar Hit by Smaller Rise in Orders for Durable Goods

Last updated 1/28/2010 9:09 AM ET (GMT -5) 18 Comments

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Kathy Lien

Director of Currency Research, GFT

Another round of disappointing U.S. economic data has pushed the dollar sharply lower against the Japanese Yen and many of the other major currencies. Despite the Fed's optimism, if economic data does not improve, the central bank's credibility will come into question. The euro has not benefited from the sell-off in the dollar as concerns about Greece continue to weigh on the single currency. Last night, China suggested that they may not be interested in buying Greek debt, eliminating one of its the biggest potential investors.

Durable goods orders rose 0.3 percent last month, which was significantly less than the market's 2.0 percent forecast. Excluding transportation, durable goods orders rose 0.9 percent which was more than the market's 0.5 percent forecast but weaker than the prior month's 2.1 percent rise. The biggest drag came from the transportation sector which saw orders plunge for the second month in a row. Although demand for vehicle and vehicle parts increased, orders for non-defense aircraft fell 38.2 percent. This decline was particularly surprising considering that Boeing had previously suggested that there was a rebound in orders in December. Shipments of non-defense capital goods rose 3.7 percent, the largest increase since December 2007. On balance, the report was disappointing and suggests that demand for big ticket items may be starting to slow. 

Meanwhile weekly jobless claims continued to fall. The number of people filing for unemployment benefits dropped from 478k to 470k. Continuing claims also declined from 4.659 million to 4.602 million. Given the recent layoff announcements by companies like Verizon, it is difficult to share the Fed's optimism about the outlook for the U.S. economy. Even though the number of people receiving extended benefits also dropped, we are inclined to believe that this reflects the complete expiration of benefits for some Americans and not acquisition of new jobs.

Comments from central bank officials will dominate the headlines today with the Davos meeting underway. Continued speculation about Bernanke's confirmation could also weigh on the markets. 

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Comments (18)

alexjbrandt

January 28, 2010 at 09:19 AM ET

I'm not surprised by the disappointing data today, the US economy is on a L shaped 'recovery' path. The only month in which we got reasonably good US data was from November. Then everyone piled on board thinking that we were on the path to recovery. The longer this lack of 'recovery' continues, the more risk I see of a double dip recession. US GDP data tomorrow will be interesting, but don't get caught off guard as I suspect it will disappoint as well.

klien

January 28, 2010 at 09:30 AM ET

Forecasts are extremely high so possibility of a miss is high

Yaakub

January 28, 2010 at 09:24 AM ET

Is it true that the Goverment will help to solve the Greece issues? Will this support Euro? What will be the damage?

alexjbrandt

January 28, 2010 at 09:28 AM ET

Most of the EU ministers have been on the wires this morning saying there is no EU government bailout for greece, etc.

"Eurogroup finance ministries are lining up to deny that there is any Greek bailout in the works. France is the latest."

"Trichet is on the wires from Davos, saying there is the need for full and rigorous respect for EU budget rules."

klien

January 28, 2010 at 09:29 AM ET

According to this article, YES

http://www.economist.com/blogs/charlemagne/2010/01/greek_bailout_within_months

Semaj

January 28, 2010 at 10:45 AM ET

Let's see if a Surprise Index of Macro Data in G-10 would be helpful today?

Anyone watching the eur/gbp? Things seem to be changing.

stevik

January 28, 2010 at 10:51 AM ET

yes im watching it i opened the position at 0.8616 but i closed it at 0.8644 and what about you ?

FD

January 28, 2010 at 10:56 AM ET

Opened at .8614 as than man suggested - still open. Giventhe EUR news I only opened a small position with the view of fading in around .8600. Oh well still a nice run so far. Thank you Bradley

Semaj

January 28, 2010 at 10:58 AM ET

TP1 @ R1 daily pivot, raise SL then TP2 @ R2 pivot. Lots of energy in the 1 hr candle building that should yield a bullish reversal daily candle.

stevik

January 28, 2010 at 10:58 AM ET

nice trade now its at 0.8655 .... and what do you thing abou eur/usd i have opened a position at 1.3958

FD

January 28, 2010 at 11:04 AM ET

Bull or Bear?

Semaj

January 28, 2010 at 11:07 AM ET

I would like to see the DOW find a bid & then look to play the DOW up USD down correlation along with the eur's strength against the gbp. If gold can rally watch the aud/usd for a long setup as well. Good luck :)

stevik

January 28, 2010 at 11:07 AM ET

what do you you mean ? i don get it :D ... i asked you what do you think about eurusd because i have bought it at 1.3958 ... ah sorry i didnt write that i have bought it ....

FD

January 28, 2010 at 11:16 AM ET

Personally not sure about the EUR/USD pair - Europe is a bit naffed but GB is in worse shape. You might be better off asking some one elses opinion though as I am having a truely bad run at tment. Good luck

Semaj

January 28, 2010 at 11:25 AM ET

IF the Dow can rally from here then there might be dollar weakness which would then help the confidence to long the eur/usd. It's a correlation from 2008.

schultzz.at

January 28, 2010 at 12:56 PM ET

Stevik, I see the EUR/USD in an aggressive downtrend. The pair trading below 1.40 is not a good sign. Asian traders decided to hit the pause button tonight at 1.3930. I think this support could hold for the rest of the U.S. session and also the Asian session given that EA16 employment numbers and U.S. 4th quarter advance GDP are scheduled for release tomorrow.
I personally have already given order to reinitiate shorts at 1.4030 targeting 1.38.
We are currently in a dangerous situation with bond yields and credit default swaps for Greece skyrocketing. What is even more concerning is that the whole thing is becoming contagious with the 5yr CDS for Portugal also up more than 10%.
Tom Schultz.

MTkach

January 28, 2010 at 08:11 PM ET

I am shorting EURUSD. Sold at 1.3998. I beleive Eur/Usd is in down trend that will stay here for a while. Fundumentally speaking there are things to worry about: Greece and etc and there are no signs of improvement just yet. Technically, new lows have been made at about 1.3929 which now have been broken even lower. Price broke through 38.2% retracement of move from March'09 lows to recent highs and is possibly heading for 50% mark at 1.3794. So in my opinion technicals and fundumentals agree so I am shorting. Price is now about 1.3930 mark, i moved my stop to break even, does any one think it is too early for this (to move stop to BEP)? Would you suggest giving price action a bit more space to move?

So far I can see that sentiment on this forum is mixed, some are bulls some are bears and some just staying out. I beleive that the best way to test your trade is to present it for criticism by the guys on another side of the fence. Any criticism? ;-)

Any one shorting this pair can you let me know your resoning, too.

Thanks to All. Good Trading!

neel

January 29, 2010 at 12:37 AM ET

eurusd hit a new low of 1.3911 and is hovering around 1.3922 at the time of writing this but it is likely i think that risk appetite will rise today later in the day overall euusd is bearish but the full picture of greek bonds will only emerge next week i believe that market will realise it pulled risk appetite out too soon too fast and will pull the dollar back down leading euro to rise later today i believe that euro usd will gain to around 1.4090 it will likely drop to just a little below 1.3900 before that so while euro usd is bearish market will be bullish later today

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About The Author

Kathy Lien began her FX trading career 10 years ago at J.P. Morgan Chase. After graduating New York University’s Leonard Stern School of Business at the age of 18, Kathy joined the bank's interbank FX trading desk and eventually moved to the cross markets proprietary trading desk. In the interbank market, her ability to create solid fundamental and technical analysis from the myriad of information on the market helped her trade forex spot and options. Her experience eventually led her to be chief strategist at Daily FX where she worked until she joined GFT in 2008.

With her knowledge of forex, as well as her experience trading other products, such as interest rate derivates, bonds, equities, and futures, Lien has built a reputation as an international currency analyst. She is frequently quoted on CNBC, Bloomberg, Fox Business and Reuters. Lien has also written for publications like Active Trader, Futures, and SFO magazine. She is the author of the newly updated Day Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves, and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Boris Schlossberg.

To buy Kathy’s newly updated Day Trading and Swing Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves, click here.