EUR/USD Daily Technical Analysis for April 25, 2017

The EUR/USD surged higher breaking through trend line resistance, surging 1.5 big figures in the wake of the results of the French elections.  Riskier assets gained traction with the DAX surging 3.37% and above the 12400 mark, and the French CAC rising 4.14%. While the government shutdown in the United States is looming, the markets shrugged aside negative news helping the Euro rise.

Technicals

The EUR/USD gapped higher immediately following the results of the French Presidential election.  The exchange rate rallied 1.5 big figures but still needs to eclipse resistance near the March highs at 1.0906.  Support is seen near former resistance near a downward sloping trend line that connects the highs in November of 2016 to the highs in March and comes in near the 1.0820 level.  A break above the 1.0906 level would lead to a test of the highs made following the U.S. Presidential election at 1.1299. Additional support is seen near the 10-day moving average at 1.0687.

Momentum on the currency pair has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This occurs as the spread (the 12-day moving average minus the 26-day moving average) crosses above the 9-day moving average of the spread. The index moved from negative to positive territory confirming the buy signal. The index is printing in the black with an upward sloping trajectory which points to a higher exchange rate.

The relative strength index (RSI) is a momentum oscillator that measures accelerating momentum, moved higher with price action and is testing resistance levels near the March highs at 66.  A break of this level would indicate a breakout in momentum, which would also point to higher prices for the EUR/USD.  The current reading of 66, is just below the overbought trigger level of 70 and could foreshadow a correction.

The hourly chart of the EURUSD shows that the currency pair is forming a bull flag continuation pattern. This is a pause that usually refreshes after trading forms a consolidation pattern.  Support is seen near the 1.0820 level which coincides with the daily trend line support level. Additional support is seen near the hourly lows at 1.0776.  Hourly momentum is negative as the MACD generated a crossover sell signal, as the spread crossed below the 9-hour moving average of the spread.

Macron Takes on Le Pen

Macron was declared the winner of the first round of the presidential election with 23.8% of the votes, he will now take on Le Pen, who is second with 21.5% of the votes, for second round of May 7. While the polls show that The conservative candidate Fillon is third with 19.9% and leftist Melenchon in fourth place with 19.6%.

The German April Ifo rose to 112.9, up from 112.4 in the previous month and higher than we expected, and the highest reading since July 2011. However, the breakdown showed that this was entirely driven by a jump in the current conditions indicator – to 121.1 from 119.5 in the previous month. The more forward looking future expectations reading meanwhile fell back to 105.2 from 105.7, which dampens the picture especially as it ties in with the weaker PMI readings.

Chicago Fed National Activity index fell in March

U.S. Chicago Fed National Activity index fell to 0.08 in March following the downward revised 0.27 increase in February which was 0.34 and -0.25 in January which was bumped from -0.02. It was 0.47 in November, the highest since November 2014. Two of the four broad measures, employment and sales, orders, inventories, of the index declined, while production related indicators and consumption were steady to higher. Some 48 of the 85 individual indicators made positive contributions, while 37 made negative contributions. The 3-month moving average downshifted to 0.03 from 0.16.

The Bundesbank said that the German economy gained Momentum

The Bundesbank said that the German economy gained momentum in Q1. In its monthly report, the Bundesbank said the “German economy is likely to have significantly gained momentum in the winter quarter of 2017”, adding that sentiment in manufacturing “extraordinarily optimistic” as a strong rise in orders indicates that strong industrial trends continue to now and industrials see favorable export prospects. The report warned that the jump in the construction impact is partly related to the annual adjustment of reporting companies, but added that the sector will probably remain lively in coming months. Private consumption meanwhile is likely to remain an important supporter of growth given the favorable labor market and developments in consumer sentiment.