DXY falters for a third session on weaker durable goods

Tuesday, October 28, 2014

The dollar index held on track to close lower for the third straight session today, extending declines towards 85.180 after durable goods orders posted a surprise fall in September. Market participants had expected a 0.5% increase but instead orders fell 1.3%, extending the 18.3% decline seen in August. The dollar lost ground against a basket of its major peers, notably the yen and the euro as the index erased the majority of the previous week’s gains. Levels throughout October have been trading broadly within the 85.00-86.00 range as the index struggles to sustain levels either side of this channel for long.

After capping a fourth consecutive session of price declines, the weaker than expected durable goods orders saw spot gold prices build on support around $1,225/oz as the yellow metal added 0.6% throughout the session. At one point spot prices were trading above $1,235/oz early on before slipping slightly below ahead of the US open. The S&P/Case-Shiller hope price index saw healthy growth, increasing 5.1% in August from 5.63% the previous month which saw safe havens give back some of the session’s early gains.   

Overall, the general mood seems to be quietly optimistic as the FOMC meets for its October rates setting meeting and QE draws to a close. Market participants are anticipating that the Fed, after bringing a close to its asset purchasing programme, will reinforce the outlook that the US market will need to be closely monitored before an eventual rates rise can be considered. With data coming out of the eurozone and China pointing towards more turbulent times investors have grown increasingly reliant on the comparatively positive outlook for the US. After spiking towards a multiyear high earlier this month volatility in the S&P 500 as represented by the VIX has come down almost 50.0% from 31 last week to 16 currently as confidence slowly returns. US consumer confidence rose to a seven year high in October as the widely followed Conference Board index rallied to 94.5 while investors remain hopeful ahead of the FOMC's rate decision tomorrow. 

US durable goods suffer surprise fall in September

DGNOCHNG Index US Durable Goods 2014 10 28 13 08 44

VIX slips lower after spiking earlier this month

VIX Index Chicago Board Options 2014 10 28 13 29 13

US consumer confidence rises to a seven year high

CONCCONF Index Conference Board 2014 10 28 15 03 43

Topics: US Fed, Gold, DXY
More from: Kash Kamal