Market Analysis

Key week for United States macro data as recession fears grows

Fears over the health of the United States economy have once again returned after data from the world’s largest economy last Friday showed that U.S durable goods orders fell by the most in six months during April. The much worse than expected durable goods orders figures comes on the back of the release of the weakest United States manufacturing purchasers managers index reading since September 2009.

Much of the weakness in the United States durable goods orders was due to a rapid decline in new orders from the crisis hit American aviation company, Boeing. More troubling for the American economy was a rapid decline in new business investment, due to fears about the ongoing trade war between the United States and China, which has got considerably worse since the April durable goods orders number was taken.

This week traders and investors will get an indication of how United States housing, inflation, growth, and consumer confidence are shaping up under the strain of the ongoing Sino-U.S trade war. The Federal Reserve will also be watching the macroeconomic data releases closely this week, with the central bank adopting a wait-and-see approach before it decides its next policy move.

Recessionary calls are likely to heighten if United States economic data comes in much worse than expected this week, with many leading economists rightly pointing out that the economic impacts of the very latest round of trade tariffs have yet to truly show up in leading U.S data points. The release of the May ISM manufacturing and U.S Non-farm payrolls reports also take on extra significance next week.

The reaction of the U.S Dollar Index to the recent softer than expected manufacturing and durable goods orders figures showed that traders and investors fear that the Federal Reserve may be forced to cut interest rates if U.S data starts to weaken further. If we continue to see high-impacting U.S economic data disappoint to the downside, the greenback is also likely to come under significant selling pressure, particularly against the Japanese yen and Swiss franc currencies.


USD/JPY Daily Mountain Chart | Source: ActivTrader

USD/JPY Daily Mountain Chart | Source: ActivTrader


Following a short-lived technical correction to the 110.60 resistance area last week the USD/JPY pair is once again probing the downside, with the 109.00 level the key technical region to watch this week. A breach of the 109.00 level exposes the USD/JPY pair to further selling towards the 108.40 level, while extended weekly resistance is found at the 107.70 level.


Written by Nathan Batchelor, External Analyst, ActivTrades

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