EUR/USD Daily Technical Analysis for January 29, 2018

The EUR/USD attempted to move higher on Friday but was unable to reach Thursday’s peak, weighed on by comments from President Trump on Thursday that he favored a strong dollar. U.S. data was mixed, with GDP coming in short of expectations, but durable goods showing a strong headline results.  The currency pair remain buoyed by the ECB’s policy comments on Thursday, as Draghi was optimistic that inflation would return.

Technicals

The EUR/USD moved higher, but fell short of the 1.25 handle trading near the 1.2425 level for most of the North American trading session.  Support on the currency pair is seen near the 10-day moving average near 1.2293. Resistance is seen near Thursday’s highs at 1.2537.  Momentum is positive as the MACD (moving average convergence divergence) histogram prints in the black with an upward sloping trajectory which points to a higher exchange rate.  The RSU also edged higher after breaking through resistance hitting a fresh 6-month high on Thursday which reflects accelerating positive momentum. The only caveat is that the RSI is printing a reading of 74, which is above the overbought trigger level of 70 which could foreshadow a correction.

The ECB’s Coeure stresses upside risks to growth

The ECB’s Coeure said the forward guidance will have to evolve, adding that officials are in talks while stressing that the central bank has to focus more on upside risks to the economy, while being “patient and prudent” along the road to policy normalization. Hawkish tones, that sent Bund yields to intraday highs, although Coeure has been emerging as one of the more hawkish executive board members, and his view are not necessarily the mainstream.

The ECB kept its monetary policy stance on forward guidance unchanged at yesterday’s meeting, with Draghi still insisting that the QE program can be extended in duration. Draghi tried his best to play down any changes to the ECB’s stance today and was very eager to stress that the guidance was pretty much left unchanged, compared to the December meeting.

UK GDP was Better than Expected

Preliminary UK Q4 GDP better than expected, with growth rising to 0.5% quarter over quarter after a 0.4% quarter over quarter pace in Q3, and by 1.5% year over year after 1.7%year over year in the quarter prior. The median forecasts had been for 0.4% quarter over quarter and 1.4% year over year, respectively. 2017 growth was 1.8%, which is the slowest annual growth in five years, while the 1.5% year over year preliminary figure for Q4 marks the slowest annual growth rate since the first quarter of 2013. Consumer-facing activity dragged on growth in Q4.

Eurozone Money Supplied Slowed, Not a Good Sign for Inflation

Eurozone M3 money supply unexpectedly slowed to just 4.6% year over year, from 4.9% year over year in the previous month. Lending data showed loans to households rising by 3.2% year over year, up from 3.1% year over year in November but adjusted for sales and securitization, the annual rate remained steady at 2.8% year over year. Lending to non-financial corporations rose 1.8% year over year, up from 1.7% year over year in the previous month. Monthly flows were negative though.

French Business Confidence Improved

French business confidence improves, with the manufacturing reading unexpectedly rising to 113 from 112 in the previous month, while the production outlook jumped to 34 from 30. however, in contrast to the business confidence numbers, the consumer confidence reading fell back to 104 from 105 in the previous month.

U.S. Durable Goods Increased in December

U.S. Advance durable goods orders climbed 2.9% in December, almost three times expectations, after the 1.7% bounce in November. Transportation orders were 7.4% from 4.6%. Excluding transportation, orders were up 0.6% from 0.3%. But, nondefense capital goods orders excluding aircraft fell 0.3% versus a 0.2% gain previously. Shipments rose 0.6% versus 1.3% previously.

U.S GDP Rose Less than Expected

U.S. Q4 GDP grew at a 2.6% pace, missing expectations that GDP would increase by 2.9% after a 3.2% clip in Q3 and 3.1% in Q2. Additionally, consumption growth increased at a solid 3.8% after the prior 2.2% rate. Business investment was up 7.9%  versus 2.4%, supported by an 11.6% pop in residential spending from -4.7% previously and a 6.8% gain in nonresidential spending from 4.7%. Government spending increased 3.0% after the 0.7% previously, with the Federal side up 3.5% and state and local 2.6% higher.