GBPUSD showed some signs of recovery yesterday after revisiting its 2.5-year low at $1.1726 and marking its lowest point since February 2020.
The prospects of a hawkish stance from the Fed during the forthcoming Jackson Hole economic submit to begin tomorrow has given the US dollar a substantial advantage over other crosses, especially the expectations of a more aggressive interest rate hike for the US dollar in September, given the high reduction in the US new home sales report delivered yesterday. This has given investors more hope to buy the US dollar, resulting in a massive crash for all pairs having the US dollar as their counter pairs, especially GBPUSD and EURUSD.
Nonetheless, GBPUSD has shown some resilience afterwards, rebounding from yesterday’s lows to a new high at $1.1875. The price is currently ranging at $1.1817 during the Asian session today.
The bears have taken some breath over the uncertainties surrounding the outcome of the US durable goods orders report to be released today. Analysts consider the result of this report to be the significant factor in moving all US dollar crosses in the market today.
The US durable goods orders report is critical economic data that measures the overall changes in the total number of pending orders placed for durable goods with the manufacturer.
Durable goods here refer to complex products with a life expectancy (sustainability) of more than three years. This includes automobiles, aeroplanes, computers, and appliances.
The report from this data is used to predict the future expectations from the industrial sector in the coming month. Thus, an increase in the purchase of durable goods shows manufacturers will have to embark on more productive activities. In contrast, a decrease in the purchase of durable goods will slow down future production by manufacturers.
The outcome of the durable goods orders report today is significant to investors as a reduction in the number of durable goods purchases will further support the claims of persistent inflation in the US economy, evidenced by the decline in the purchase of new homes in the report given yesterday.
A reduction in the purchase of durable goods could easily allude to the high cost of such products (inflation), which will serve as the second evidence of a rising inflation rate after the initial decline seen in the rate in July from the CPI report.
Rising inflation, no doubt, will push the Fed to embark on a more aggressive interest rate hike during their next session in September. The forecast for the durable goods orders report is 0.9%, while the previous record was 2.0%.
To accompany this report is the data on core durable goods orders which states only the new orders placed with manufacturers for durable goods without including the transportation items.
The fact that the highest orders for durable goods usually came from transportation items has made it necessary to produce a different report for pending durable goods orders, excluding the transportation items.
This helps analysts understand the areas where the most significant increase or decrease in purchase orders for durable goods were recorded. The forecast for this data is 0.2%, while the previous record was 0.4%.
How will the US durable goods orders report affect GBPUSD today
The report from the US durable goods orders today will undoubtedly significantly impact the performance of GBPUSD in the market.
An increase in the pending orders for the purchase of durable goods would signal both consumers’ confidence in the economy and a slow down in the inflation rate. This will cause investors to slow down on their expectations of a more aggressive interest rate hike from the Fed during their next session in September. This might weaken the US dollar and trigger more upside movement for GBPUSD.
On the contrary, a reduction in the pending orders for durable goods will signal an endemic inflation rate which will give investors more assurance that the Fed will likely be more aggressive during their next session in hiking the interest rate. This will strengthen the US dollar and cause more decline for GBPUSD.
Forecast for GBPUSD ahead of the US durable goods orders report
GBPUSD is sitting on the weekly support created at $1.1816 during the European session today while patiently awaiting the outcome of the durable goods orders to determine the next direction for this pair.
A higher reading from these reports could trigger rapid bullish momentum for this pair, with the immediate resistance seen at $1.2004. A break above this level could trigger more upside, with the target at $1.2138.
On the contrary, lower reading from this report will strengthen the US dollar and cause more downside for GBPUSD. This means we can expect a retest of the previous 2.5 years low created by this pair yesterday at $1.1726. A break below this level could trigger more downside for GBPUSD.
Finally, positional traders and other long-term investors are to watch out for the result of the US prelim GDP q/q report to be released tomorrow, as the outcome of this report will determine the long-term direction of GBPUSD.
