Durable Goods orders in the world's largest economy plunged 2.5 percent in December after falling a revised 0.1 percent the month prior amid economists' expectations of a 1.5 percent rise. At the same time, orders excluding transportation rose a mere 0.5percent after climbing a massive 4.5 percent in November. The headline reading marks the second largest decline in the past five months. The reading is of particular importance due to the fact that durable goods measure goods that are expected to last more than three years. In turn, the release serves as a gauge of output to come.

Taking a look at the breakdown of the report, core capital orders added 1.4 percent, while shipments rose 1.7percent. Looking ahead, market participants will shift their focus to U.S. GDP, which will be released tomorrow at 13:30 GMT. As uncertainty surrounding the economic recovery remains due to slack in the labor force, a better than expected release may turn out to be the catalyst needed for the greenback. On the other hand, a disappointing report may place additional weight on the dollar.

USDCHF 15 Minute Chart

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Source: FXC's Strategy Trader

The USDCHF tumbled immediately after the release of the U.S. durable goods orders report. So long as price action remains capped by 0.9735 (descending daily trend line dating back to July), downside risks remain. It is worth noting that our speculative sentiment index stands at 4.28 and signals for increased losses in the near term.

Written by Michael Wright, Currency Analyst

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Michael Wright is the author of FX Headlines, Fundamentals vs. Technical's, Weekly Spotlight, Intraday Trading, and Forex Trading Weekly Forecast