Advertisement
Advertisement

EUR/USD Daily Technical Analysis for February 13, 2018

By:
David Becker
Published: Feb 12, 2018, 19:25 UTC

The EUR/USD continued to consolidate as the risk on trade seemed to come back into favor capping any advances in the greenback. Fitch affirmed the German

EUR/USD

The EUR/USD continued to consolidate as the risk on trade seemed to come back into favor capping any advances in the greenback. Fitch affirmed the German AAA rating, and the ECB’s Nowotny was on the tape saying rates would need to go higher in the near future.

Technical

The EUR/USD continued to consolidate making a higher high and a higher low. Support on the currency pair is seen near the 50-day moving average at 1.2079.  Resistance on the exchange rate is seen near the 10-day moving average at 1.2360.  Momentum is negative as the MACD (moving average convergence divergence) index prints in the red with a downward sloping trajectory which point to a lower exchange rate. The Fast stochastic has rebounded from oversold territory and generated a short-term crossover buy signal, which points to a higher exchange rate.

Fitch affirms German AAA rating- as expected

The rating agency noting that “the AAA ratings reflect Germany’s diversified, high value added economy, strong institutions and history of sound public debt management”. Fitch expects ongoing robust growth and like most assumes a Grand Coalition government under Merkel, even if there is still some risk that SPD party members will derail the coalition deal. Still, Fitch stressed that it “does not expect any period of political uncertainty to significantly dent economic confidence, or for there to be a marked change in macroeconomic policy by the new government”.

ECB’s Nowotny Said that  Rates will have to go higher in foreseeable future

ECB’s Nowotny Said that  Rates will have to go higher in foreseeable future. Speaking in Austrian TV over the weekend Nowotny played down the importance of the recent stock market correction and also suggested that he doesn’t see the need for net asset purchases to continue beyond September – at least not in the current form – even if there is still room for inflation to move higher. So the Austrian central bank head remains on the side of the hawks at the council and the consensus for a gradual phasing out of net asset purchases in Q4 continues to build, even if stock markets remain volatile. Nowotny also said that there was “some concern” at the ECB about U.S. political pressure on the currency, adding that this was a topic at Davos and will be a topic at the coming G20, but in context the comments suggest that the ECB is primarily concerned about currency wars and political pressure, rather than the level of the EUR, which doesn’t seem to deter Nowotny from starting to eye rate hikes, which will only come into play one net asset purchases have been phased out, i.e. not before next year.

Trump unveil his admin’s $200 billion infrastructure plan

Trump unveil his admin’s $200 billion infrastructure plan this morning, though it will rely on local, state and private investment to reach a $1.5-1.7 trillion spending total. A boost in outlays for the military, border security and veterans’ care, along with opioid treatment are being mulled. This will be released as part of the overall fiscal 2019 budget plan, which may reverse the Republican Party’s 10-year budget balance goal. If so, that could be adding weight to the Treasury market and dollar sell-off, according to various blogs, on top of the $300 billion 2-year budget deal reached last week. Yet budget director Mulvaney said Sunday night that it will “bend the trajectory down” on the deficit towards balance, which implies spending cuts elsewhere and higher growth estimates to square the deficit circle. Outside budget watchdogs are estimating a $1 trillion/year increase in the deficit. It may also include plans to slash the permitting process to 2-years or less and would be the starting point for negotiations with Congress.

Switzerland’s January CPI rose unexpectedly

Switzerland’s January CPI rose unexpectedly dipped to a headline rate of 0.7% year over year, down from 0.8% year over year in December, which was the cycle high, first seen in November. The inflation rate is now back to where it was last October. CPI should hold up in the coming months, given the year over year depreciation in the franc, which dropped sharply from late July last year. Switzerland’ HICP measure came in at 0.8% year over year, down from 1.1% year over year in the month prior.

NY Fed Q1 GDP NowCast estimate rose to 3.35%

NY Fed Q1 GDP NowCast estimate rose to 3.35% from 3.22% previously, while the Atlanta Fed’s Q1 GDPNow estimate has been going the other direction after a high initial estimate, but remained at 4.0% for the second consecutive time: “The GDPNow model forecast for real GDP growth in the first quarter of 2018 is 4.0 percent on February 9, unchanged from February 6.

About the Author

David Becker focuses his attention on various consulting and portfolio management activities at Fortuity LLC, where he currently provides oversight for a multimillion-dollar portfolio consisting of commodities, debt, equities, real estate, and more.

Did you find this article useful?

Advertisement