US durable goods orders report is due Wednesday
America's economy isn't great again, at least not yet.
The final year of Obama's Presidency will likely end with growth around 1.6%. Getting it up to a great-ish 3% is a tall task and the main driver must be business investment. It would drive productivity gains and help to avoid inflation.
Durable goods orders are one of the best forward-looking indicators into how consumers and businesses are feeling. The report to be released Wednesday covers October so it will be the final report of the pre-Trump era.
The line to watch is 'capital goods orders non-defense, excluding air'. It's a proxy for business investment and economists expect a 0.3% m/m rise after a surprise 1.3% decline in September.
The chart shows the struggles in this report over much of the past 18 months. Some of that negativity was washed away in the solid three month stretch from June-August but the drop in September raised fresh concerns.
Economists are widely divided on the outcome of Wednesday's report with estimates ranging from -2.5% to +1.0%.
How to trade it
At the moment, economic data doesn't matter.
The US dollar is trading on politics and momentum. Dollar dips have been shallow and bought aggressively.
Keep an eye on USD/JPY in the lead-up to the numbers. The pair has struggled to climb above 111.40 and if it can climb higher ahead of the data, it would set up a trade.
Buying dollar dips has proven to be a fantastic move since Nov 8 and a 30+ pip drop on soft data is likely to be another opportunity. I would avoid it in USD/JPY if that level isn't taken out because a rejection there and the looming US holiday might signal a broader retracement phase.
Overall, expect US trading to wind down early on Wednesday with a de facto four-day weekend starting Thursday.
