On Thursday, US economic data is expected to actually improve, as Durable Goods Orders for the month of March are forecasted to rise 0.1 percent. This headline reading may actually be held down by the transportation component, as Boeing reported only 99 airplane orders, down from 125 in February. While the headline will have the most impact on forex trading, the markets should keep an eye on non-defense capital goods orders excluding aircraft, as this number serves as a leading indicator for business investment.

What Are the Markets Facing?

On Thursday, US economic data is expected to actually improve, as Durable Goods Orders for the month of March are forecasted to rise 0.1 percent. This headline reading may actually be held down by the transportation component, as Boeing reported only 99 airplane orders, down from 125 in February. While the headline will have the most impact on forex trading, the markets should keep an eye on non-defense capital goods orders excluding aircraft, as this number serves as a leading indicator for business investment. The reading has dropped for the past two months, and continued declines will not bode will for US GDP in the first quarter, especially as consumer spending wanes. Meanwhile, recent regional Federal Reserve reports have reflected diminishing shipments and new orders for manufacturers, especially in the Richmond and Philadelphia areas. If this report shows that demand for durable goods remains weak, the news will only add to evidence pointing toward a US recession. However, it may not do much to shift expectations for the FOMC’s April 30 meeting, as building price pressures in the economy will likely prevent the Committee from cutting by anything more than 25bps. In fact, fed fund futures are actually pricing in an 18 percent chance that the FOMC will leave rates unchanged at 2.25 percent, and if the durable goods orders figure proves to be stronger than expected, the probability of steady rates may increase dramatically.

Bonds – 10-Year Treasury Note Futures

Treasuries continue to consolidate tightly between support at 116 and resistance at the 100 SMA at 116-14. Given the hawkish, inflation-focused commentary from various Federal Reserve officials we’ve seen lately, it’s no wonder the bonds markets are moving in favor of no change in interest rates next week. Upcoming US data may boost this sentiment, as durable goods orders are expected to improve mildly, which could weigh Treasuries down toward 115-05. On the other hand, an extremely disappointing reading could lead the contract to jump toward the 100 SMA once again.

FX – EUR/USD

Following the EUR/USD test of 1.60 yesterday, the pair has since backed off quite a bit but still remains contained to a tight rising channel. However, if Thursday’s US durable goods orders report proves to be surprisingly strong, the data could trigger additional US dollar gains to weigh the EUR/USD pair down toward significant support at 1.5700. In fact, according to Technical Strategist Jamie Saettele, EUR/USD coming below 1.5712 would confirm that a top is in place. Nevertheless, this may not be the ultimate top for the pair, as significant sharp rallies tend to be followed by long periods of consolidation.

Equities – Dow Jones Industrial Average

The Dow Jones Industrial Average has retraced nearly 50 percent of the drop from 14,198.10 to 11,634.82, as the index managed to break above resistance at the 100 SMA last Friday as risk appetite grows. Indeed, the confluence of the 100 SMA and the 38.2 percent fib of the mentioned bear leg has formed a zone of support at 12,614/45. Upcoming US economic data could support additional gains to the 12,900 level as durable goods orders are anticipated to improve. However, if the news proves to be disappointing or if risk aversion comes back into play in market-wide, the DJIA could pull back sharply toward noted support.

Terri Belkas is a Currency Strategist at FXCM.