www.dailyfx.com .. European Industrial New Orders reported a monthly gain of 3.1% versus expectations...

... of only 1.8% rise but the euro floundered through most of the European morning session trading below the 1.2200 figure for much of the time. The currency was weighed down by heavy hedge fund sales during Asian hours which many dealers believed were the result of position liquidation rather than any specific response to news flow. However, the bid tone for the euro improved after the Industrial New Orders data and with the market positioning for softer Durable Goods orders numbers out of the US the euro may recover most of its overnight losses.



The US Durable Goods orders are expected to show a first decline in four months with several analysts including CALYON and UBS calling for much greater drops of -3.5% vs. consensus expectations of -1.5% decline based mainly on the premise that Boeing’s order flow will be markedly smaller in the month of July. In the past three moths Boeing has managed to attract more civil aviation businesses than it has in all of 2004. Overall the Durable Goods are expected to decline -0.8% ex-transportation and may provide the first hints of US capital spending slowdown.



Also on the agenda today will be New Home Sales which are expected to report lower as well. Yesterday we noted that the US housing market may be showing signs of turning over and while the Existing Homes sales data reported Tuesday printed slightly below consensus but still at a very respectable rate of greater than 7 Million units, the more troubling aspects of the report were in the large rise of inventories especially in the condominium sector. While sales are a lagging indicator of housing demand, inventories are a leading one. With inventory rates up 25% y/y in some of the nation’s hottest markets the hissing sound of a bubble burst is becoming louder and louder. Given housing’s crucial role in the growth of US economy that news does not augur well for dollar bulls.



FX Spot Overnight

- EUR recovers 2200 figure after Industrial Orders

- JPY channels between 110.70-40

- GBP hovers around the 7940 level

- CHF at 2728 after trading off 2780 highs