Bearish USD Despite Good Data

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  • Durable orders show healthy demand in the US
  • New home sales close to consensus but January figure revised upwards
  • US dollar down again under weight of trade wars concerns


The US data released today was fairly strong even if it had little impact on the markets that could be completely somewhere else. Especially strong was the report on durable orders that showed a rise of 3.1% m/m in February. Although the headline number is often skewed by large-ticket items, the core, ex-transport measure showed a healthy growth as well (1.2% vs. the consensus of 0.5% m/m). More importantly, when looking at the y/y growth rates in both categories we see upward trajectory that seems to underscore strength of domestic demand in the US - a necessity for a scenario of higher demand-driven inflation.

 

  • A steady rise in durable orders is a good sign for the US economy. 


The new home sales report was pretty much flat, showing an annualized number of 618k new home sales in February, just a notch below the consensus (622k) but the January number has been revised upwards by 29k so overall data was modestly positive. 
It had little impact on the markets though. Investors are completely focus on ramifications of policy changes by Donald Trump who is clearly driven to implement solutions that reduce US trade deficit, even at a risk of global slowdown. As such the reasoning could be that he might opt for a weaker rather than stronger dollar, regardless of what he says publicly. 

 

  • USDIDX shows weakness despite decent data as investors focus on trade wars. 


Looking at the chart of the US dollar index we can see a lot of weakness. The instrument remains in a long-term downward trend and after breaking a huge support zone around 92 it was unable to at least test it from below, reversing from a low point of 90.95 instead. Moreover, a completed "abc" correction could be an indication that the "recovery" phase is over.  The key support is at 88.35.