• US durable goods orders come in above forecasts
  • US Treasury secretary Mnuchin “very excited” with progress on tax reform
  • USD looks to recover whilst Gold sinks to 3-week low. Tnote breaks key support

A busy afternoon of economic releases from North America has begun with some more solid data from the US. Tuesday saw better than forecast PMI readings for both the manufacturing and services numbers and today a better than expected release regarding durable goods orders has further supported the notion that the world’s largest economy is performing well. 

Durable goods orders rose by 2.2% M/M in September against consensus forecasts for a 1.0% rise and a prior reading of 2.0% (revised higher from 1.7% previously). The core reading was equally strong with a M/M gain of 0.7% comfortably better than the expected 0.5% rise. 

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 The year-on-year readings for both durable goods orders and the core number have continued the rise seen since the turn of the year. Source: XTB Macrobond

In terms of market reaction the US dollar has moved higher following the release with the trade-weighted index moving back to almost flat on the day at 93.70. The 94 level remains a potentially major resistance zone and given that the Euro accounts for the the Lion’s share of the index, tomorrow’s ECB meeting (preview here) could prove pivotal in whether the dollar can break this key level. Gold has also seen a move off the back of the number with the precious metal falling to make a new low of the day at 1271. The market has been in a fairly clear downtrend since peaking at 1305 at the start of last week.

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 Gold remains in the recent downtrend and could be set for a retest of the monthly low at 1260. Source: xStation

Another development that could be positive for the greenback and weigh on Gold is comments from Steve Mnuchin. The Treasury Secretary has said he is “very excited” with the progress on tax reform and the President Trump is focused on the 20% corporate rate and the middle-class tax cut. These comments are very similar to prior ones and as such reveal little new. They have however been picked up by several newswires and could have an impact on the markets. During a post yesterday we mentioned the 124.70 level as potentially key support and the market has now made a clean break below here. THis could lead to further downside for Gold and a move higher in the USD if the divergences identified yesterday don’t grow further. 

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 The Tnote has also fallen lower, showing rising US yields, and broken through prior support at 124.70.