USD to Remain Bid This Week, As Goods Demand Remains High

Recent reports of goods sold in the US, such as home and auto sales, as well as today’s durable goods orders, suggest that they have experienced a sudden surge in the past two months. These sectors are highly sensitive to interest rate changes, and last year’s FED policy impacted them negatively. However, as interest rate hikes slowed since December, there was a release of pent-up demand.

This trend indicates that consumers still have money to spend and are interested in purchasing homes and cars. Vehicle production on the other hand was affected by the pandemic and is yet to catch up. COVID-19 has also inspired many people to buy homes and start families, with demand still existing even for those previously priced out of the market.

While some of the increase could be seasonal, it cannot fully explain the recent surge. Manheim’s report earlier this week, showing an unexpected 0.8% increase in its used vehicle index, supports this ongoing trend. Morgan Stanley’s recent note corroborates these findings, but without a clear explanation.

A Ford dealer’s comments shed light on the situation, stating that “We’re just blown away by how strong January was… the best-used car month we’ve had in three years.” This suggests that consumers still have money to spend, and the Fed may have more work to do to stimulate the economy.

The investment opportunities in this situation are clear: homes and cars. However, there is a risk that the FED may increase interest rates to a level so high (above 6%?) that it could exhaust the pent-up pandemic savings, possibly by the end of this year, and bring about a recession. But for now, the demand for goods is keeping the economy on track and today’s reports showed an 8.1% jump in pending home sales. So, the USD will most likely remain bullish and we will try to sell bounces in risk currencies, such as in EUR/USD and NZD/USD .

EUR/USD Live Chart

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Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.

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