Breakdown of the latest developments on the global exchanges
Feb 25, 2021, 3:27 PM GMT

U.S. Durable Goods Orders Increase by Most in Five Months

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New orders for manufactured U.S. durable goods rose by 3.4 per cent in January, thereby beating the preliminary market forecasts, say the Census Bureau. This is the strongest monthly performance in nearly half a year, as the American economy remains on the fast-track to recovery.

January's performance outstripped the 1.2 per cent industry expansion that was recorded a month prior and surpassed the initial expectations for a much more moderate growth by 0.9 per cent.

U.S. Durable Goods Orders

This is welcoming news for U.S. policymakers as it entails industrial expansion and eventual stabilisation of output. The global vaccination effort is easing the pressure that is being exerted on economic activity, allowing for aggregate demand to start returning to its pre-crisis levels.

Nevertheless, border restrictions continue to represent a major obstacle to full recovery, as the pandemic still weighs down on the prospects for a swift reopening of the global economy. This was acknowledged as a persisting threat to recovery most recently by the RBNZ.

Nevertheless, the prospects for the U.S. economy remain quite solid. Crude oil production is rising, and the 10-year Treasury Note's yield is no longer at its previous low.

All of this entails potential dollar strengthening in the near future. As can be seen on the 4H chart below, the EURUSD is currently developing a strong upswing. The latter is taking the form of a classic ABCD pattern.

This development implies the subsequent emergence of a potential bearish correction once the price action reaches point D, which is roughly 50 pips away from the current market price.

Meanwhile, the underlying bullish momentum looks close to being exhausted, as underlined by the MACD indicator. One such bearish correction could fall as low as the 100-day MA (in blue) before some support is found.

EURUSD 4H Price Chart