[B]NOV 28[/B]
[B]US Durable Goods Orders (OCT) (13:30 GMT; 08:30 EST)[/B]
[B]Existing Home Sales (OCT) (15:00 GMT; 10:00 EST)[/B]
[B]Expected: -0.2%[/B]
[B]Expected: 5.00M[/B]
[B]Previous: -1.7%[/B]
[B]Previous: 5.04M[/B]
[B]How Will The Markets React?[/B]
On Wednesday, the release of US economic data will likely highlight some of the reasons why traders are ramping up speculation that a recession looms on the horizon. Indeed, durable goods orders for October are anticipated to fall for the second consecutive month, and transportation may lead the decline as Boeing reported 56 orders during the month, down from 132 in September. However, solid corporate spending figures may be able to keep the durable goods excluding transportation figure aloft and raise expectations that capital expenditures could pick up some of the slack of consumer spending. Later in the morning, the National Association of Realtors is expected to report that existing home sales fell to 5 million – down from 5.04 million – the lowest reading since record-keeping began in 1999. Sales of existing homes account for nearly 85 percent of the market, according to NAR, so this particular release serves as a good indicator of the status of the sector as a whole. Traders will also be looking at the inventory component, as signs that supplies continue to build while demand wanes will suggest that prices have much further to fall. This news will not be entirely surprising as everyone from US Treasury Secretary Henry Paulson to Fed Chairman Ben Bernanke has acknowledged the dismal prospects for the housing sector. Nevertheless, worse-than-expected readings may only lead the markets to price in sharper rate cuts for December 11. Despite commentary from various FOMC members that indicate that they will not reduce the federal funds rates, fed fund futures now price in an 88 percent chance of a 25bp cut and a 12 percent chance of a 50bp cut at their next meeting.
What do you think the Federal Reserve will do in December? Discuss the topic in the DailyFX Fed Watch Forum.
[B]Bonds – 10-Year Treasury Note Futures[/B]
Treasuries remain contained to a clear ascending channel, though price has continued to back off from the highs of 114-31 as news the Abu Dhabi Investment Authority would invest $7.5 billion in Citibank gave Asian equities a boost, weighing the contact down. Nevertheless, Wednesday’s economic data may help keep the trend intact, as dour durable goods and housing reports could underpin the case for a Fed rate cut in December. Trendline support lies below at 113-28.
[B]FX – EUR/USD[/B]
Since EUR/USD hit an all-time high of 1.4967 last Friday, many traders have been left wondering whether the pair has topped out or if a more substantial test of 1.50 is in store. Tuesday’s US event risk may bring gloomy news to the forefront once again as the S&P/Case-Schiller index is expected to show that house prices fell for the third consecutive quarter in Q3, while the Conference Board’s consumer confidence survey is forecasted to drop to a two year low. Later in the day, the Fed’s Beige Book Report may give a clearer picture of the central bank’s view of the economy ahead of the December 11 FOMC meeting. With the recent range of EUR/USD remaining tight, the pair may be prone to break out and if the figures prove to be worse than expected, the greenback could continue its losing ways and push EUR/USD higher for a test of 1.50. However, if this break does not come on Tuesday, Wednesday’s release durable goods orders and existing home sales may do the trick. Both figures are likely to disappoint, creating additional upside potential for the pair.
Has EUR/USD topped out or will the pair test 1.50 again? Discuss the topic in the DailyFX EUR/USD Forum.
[B]Equities – Dow Jones Industrial Average[/B]
The descent of the Dow has formed a falling wedge pattern on the daily charts, which tends to serve as a bullish formation. Thus, a break above trendline resistance at 13,008 suggests that the Dow may continue to gain towards the 13,388 level. A report that Abu Dhabi Investment Authority would invest $7.5 billion in Citibank gave Asian equities a boost, and supports the case for further gains in US equities as well. However, traders should beware of US event risk on Tuesday and Wednesday. Indeed, the S&P/Case-Schiller house price index is predicted to fall for the third consecutive quarter while the Conference Board’s consumer confidence survey is forecasted to drop to a two year low. On Wednesday, durable goods orders and existing home sales are anticipated to disappoint as well. None of these releases will come as a huge shock to the markets, but if the figures prove to be worse than expected, the news could take a toll on the Dow and help push the index down towards the August lows of 12,517.94.
