The US dollar is stronger against major currencies Wednesday after a government report showed that US durable goods orders slipped by just 0.5%, less than the 1% drop expected by most economists.

This small drop is pretty impressive, actually, considering that if you exclude transportation goods from the equation, you get a 2.5% rise in durable goods (-0.5% expected), and that is the biggest increase since 3.7% in July last year. So while demand for civilian aircraft fell, there was a decent gain in business investment. This is a good sign for an economy that is on the brink of an official recession or may already be in one as it shows resilience amid weak economic conditions. And the US economy may have the falling dollar thank. Why? Because a weaker dollar results in stronger overseas demand for capital goods manufactured in the US, and the more goods get exported, the better it is for the manufacturing sector.

Topside momentum in the US dollar in the currency markets may be limited by the rebound in oil prices today. Crude oil rose back up above $129/barrel Wednesday after hitting a record high of $135.09 last week.

Mortgage Applications

Mortgage Bankers Association showed that applications for US home mortgages fell for a second straight week as borrowing rates inched higher. The housing market is expected to stay soft for a while.

Buddha-Like Bernanke?

Dallas Fed’s Richard Fisher has got this to say about Fed chief Bernanke: “I am tempted to think of him as somewhat Buddha-like…He’s developed a serenity based on a growing understanding of the hardball ways the system actually works. You can see that it’s no longer an academic or theoretical exercise for him.”

As long as Bernanke and colleagues aren’t behind the curve now as they were before (which Fed’s Yellen admitted yesterday), Wall Streeters could use some serenity amidst the uncertainty.

Forex Trading

USD/CHF finally broke above resistance at 1.0350-60 to reach an intraday high around 1.0425 but then fell to 1.0355. Resistance lies around 1.0430-40. EUR/USD fell to an intraday low around 1.5610, and nearest base is around 1.5590-1.5600. If the pair falls below this level, it may aim towards 1.5550. GBP/USD fell to 1.9700, an expected support area, and then bounced more than 120 pips to a high around 1.9830. USD/JPY rose to a 2-week high around 105.30. Strong resistance is around 105.70.

Thursday:

Fed’s Fisher speaks on inflation 0100 GMT

Eurozone business climate, consumer confidence 0900 GMT

US GDP preliminary, core PCE, initial jobless claims 1230 GMT

Fed’s Bernanke speaks on Fed’s liquidity provision in Basel 1830 GMT

UK Gfk consumer confidence 2301 GMT

Japan national CPI 2330 GMT

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