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Silver lining in terrible US data prevents range breaks

Nobody expected a contraction of 2.9% in Q1.  A second downward revision was certainly expected, but this kind of shrink was a shocker.  But that was Q1 and we are close to the end of Q2, so  durable goods orders for May, the previous month, were in the limelight.  Yet also here, the picture looks gloomy.

The result was a crash of the US dollar. However, for three currency pairs, a certain core aspect of durable goods orders prevented a breakout of ranges in three pairs: EUR/USD, GBP/USD and USD/CAD:

Taking  orders of durable goods and excluding defense and and air-related orders, we get a minor positive surprise: a rise of 0.7% instead of 0.5%. Core numbers filter out  the most volatile components and tend to see the underlying economic trends. As the data is for  the middle of the second quarter and not for the first quarter, this may have been enough for the three pairs.

See the charts with an explanation below each one of them.

EUR/USD

EUR USD forex chart rising after weak US data June 25 2014

The pair traded for a long time in the 1.3585 to 1.3650 range and suffered from weak European data. The news sent it from 1.3615 all the way to… 1.3650, where it stopped.

GBP/USD

GBPUSD June 25 2014 rising but not too much after weak US data forex chart

It took cable a long time to break above 1.70, but recent comments from the BOE sent it below the line. The news from the US sent the pair higher, to flirt with 1.70, but that was it. No convincing breakout was recorded.

USD/CAD

USDCAD June 25 2014 technical chart falling after weak US data

The Canadian dollar has been on a roll since the positive Canadian data on Friday. After the big downwards move of USD/CAD, the pair settled in a convenient range of 1.0715 to 1.0750. The news sent it down from 1.0750 to 1.0720, 5 pips above support. But there it  stopped.

The focus now shifts to the Core PCE Index, especially after Yellen put the emphasis on this number for inflation.

Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.