Factory orders: ins and outs of analysis


Factory orders represent one of the macroeconomic indicators which—along with other data— affect the exchange rate of the currencies. You can find out when it is released by checking out the economic calendar. This typically happens on the last days of the month at 6:30 p.m. Moscow Time.

In today’s article, we shall discuss how to analyze factory orders and how this information helps traders.


1. Factory orders: What is this indicator all about
2. Structure of the factory orders
3. How to trade factory orders
4. Let’s sum things up

Factory orders: What is this indicator all about

Factory orders reflect the plans of the companies and consumers to purchase goods or components for further supply. These intentions need to be legally confirmed. This can either be a purchase and sale agreement or a relevant letter of intent.

The factory orders are expressed as a percentage and demonstrate how much the data has changed as compared to the previous measurements.

Structure of the factory orders

Durable goods which, among other things, include furniture and cars account for more than half of this indicator. Unlike nondurable goods, their lifespan exceeds three years.

The goods manufactured by the consumer industry and food processing industries, as well as supplies for durable goods make up less than a half of the overall structure of factory orders.

The dynamics of the factory orders affect the subsequent data on industrial output. Stock indices such as the Dow Jones Industrial Average may be sensitive to them which can result in higher volatility. The factory orders report demonstrates its structure and the absolute number of orders estimated at billions of dollars.

The orders from industries listed below are the most volatile:

  • Aircraft industry;
  • Defense industry;
  • Durable goods result in 75% of the volatility.

Factory orders: Special features of analysis

How to trade factory orders

Statistic on factory orders influences the market, and so it’s important to evaluate it accurately.

1. Typically, the release of the factory orders report is not followed by any major spike in volatility of the U.S. dollar, even when the actual value and the forecast differ from the expected ones.

2. The increase in the factory orders indicates that the economy is growing and over time this will affect more essential data such as GDP dynamics.

3. You need to track down the statistics in the momentum while drawing conclusions regarding trends. If the figures of the factory orders have been dropping for several consecutive months, this is a bad sign for the currency; however, the trend will put pressure on the U.S. dollar in combination with other indices.

4. The big market players keep close tabs on the dynamics of the industrial sector, including factory orders. That way they can adjust their trading positions accordingly. Meanwhile, private traders can decide what type of positions to open and at which price by seeing the behavior of the big players based on the changes in the Real Market Volume histogram.

Let’s sum things up

Factory orders play a vital role in fundamental analysis. This is one of the industrial sector indications which must be analyzed as one of its vital components.

Generally speaking, the increase in factory orders means that the economy is growing (i.e., there’s a demand for industrial goods). In combination with other positive figures, this supports the US dollar and is eventually reflected in the GDP.

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