EUR/USD Daily Technical Analysis for February 12, 2018

The EUR/USD moved lower as U.S. yield continued to outpace their European counterparts.  The move toward a safe haven appears to be helping the greenback, as the velocity of the selloff in riskier assets continued to accelerate.  The decline in the Euro comes despite a upside surprise to bot the French and Italian production numbers.  Despite a selloff in the Euro, the pound was strong following better than expected production number and robust trade data. This came as BoE officials were on the tape providing a hawkish bent.

Technicals

The EUR/USD moved lower generating a lower low and a lower high which reflects a downtrend.  Resistance on the currency pair is seen near the 10-day moving average at 1.2366.  Support on the currency pair is seen near the 50-day moving average at 1,2070.  Momentum is negative as the MACD (moving average convergence divergence) histogram prints in the red with a downward sloping trajectory which points to lower prices. The MACD index recently generated a crossover sell signal as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line (the 9-day moving average of the MACD line).  The Fast Stochastic declined further reflecting accelerating negative momentum. The current reading of 2.4 is well below the oversold trigger level of 20 which could foreshadow a correction.

Italy, France production numbers surprise on the upside

Both Italy, France production numbers surprise on the upside. French industrial production rose 0.5% billion in December, manufacturing was up 0.3% billion, while November data were revised slightly higher. Italian production came in even stronger and jumped 1.6% billion, against a Bloomberg consensus of 0.8% billion, but still leaving the three month rate at just 0.8%, versus 1.6% q/q in September. Encouragingly though capital goods production rose 4.7% billion, and the overall seasonally adjusted index is at the highest level since August 2011.

UK December trade data showed a worse than expected deficit

UK December trade data showed a worse than expected deficit, with the goods deficit working out at GBP 13.6 billion, up from GBP 12.5 billion in the month prior and wrong footing the median forecast for a decline to a deficit of GBP 11.6 billion. The overall trade balance showed a deficit of GBP 4.9 billion, much worse than the GBP 2.4 billion deficit figure expected. The ONS stats office estimates that the deficit implies a 0.7 percentage point drag on Q4 2017 GDP.

UK December production contracted more than expected

UK December production contracted more than expected, by 1.3% billion after a 0.3% billion gain in November. The median forecast had been for 0.9% billion decline. The year over year figure came in flat, below the median for 0.3% year over year growth and after a 2.6% gain in the month prior. Declines in mining and quarrying drove the headline industrial figure lower, while the narrower manufacturing output figure rose by 0.3% billion and by 1.4% year over year, both up on expectations.

BoE MPC member Broadbent sounded moderately hawkish

BoE MPC member Broadbent sounded moderately hawkish during an interview on BBC radio earlier, the day after the sea-shifting guidance the central bank delivered after its February policy review and updated Inflation Report. He said that “if there were to be a couple of 25 basis point rises in a year” that would not “be a great shock.” On wages, Broadbent said that, “my guess is what’s happening right now in the first quarter, I think (household real incomes) are starting to rise,” and that the pass-through from higher import prices “is probably at its peak right now and we are starting to see wage growth improve.” Broadbent’s remarks are consistent with market expectation for a 25 basis points rate hike as soon as May, with the possibility for another later in the year, most likely November.

China’s consumer inflation cooled to 1.5% in January

China’s consumer inflation cooled to 1.5% in January, in line with economists’ forecasts, official data showed on Friday. The consumer price index had been expected to moderate from a 1.8 percent gain in December. The producer price index rose 4.3% from a year earlier, also cooling from the previous month’s rise of 4.9 percent, the National Bureau of Statistics said on its website. Analysts polled by had predicted producer inflation would ease to 4.4 percent in January.