EUR/USD Daily Technical Analysis for January 9, 2018

The EUR/USD tumbled lower on Monday, as the dollar gained traction despite stronger than expected sentiment data and Eurozone retail sales.  Prices were unable to pierce through resistance levels, and traders started to take profits, ahead of inflation data that will be released in the U.S.

Technicals

The EUR/USD tumbled lower prices sliced through support near former resistance at the 10-day moving average at 1.1982.  Target support is now seen near an upward sloping trend line that connects the lows in November to the lows in December and comes in near 1.1825.  Positive momentum is decelerating as the MACD (moving average convergence divergence) histogram is printing in the black with a downward sloping trajectory which points to consolidation.

European Sentiment Rose

Eurozone Sentix Investor confidence rose to 32.9 in January from 31.3 in the previous month, indicating that the positive mood on stock markets continued at the start of the year. Sentix reported that there was no sign of a loss of momentum across indicators, with even latecomers such as Eastern Europe and Latin America continuing to improve, but Sentix earnings that the broad and synchronous upswing also means that the likelihood of overheating is increasing.

Eurozone Retail Sales Increased

Eurozone retail sales jumped 1.45% month over month in November, more than compensating for the -1.1% month over month contraction in October and leaving the three months trend rate at 0.5%, up from 0.1% in the three months to October. The national numbers already suggested that the “Black Friday sale” is starting to have a clear impact on spending patterns that partly explains the marked variations between October and November. Still, strong data that ties in with the better than expected ESI economic confidence reading and the marked improvement in consumer confidence in recent months. Labor market data as well as survey numbers suggest ongoing job creation, which together with still low inflation and a gradual rise in wages is underpinning consumption trends.

German Manufacturing Orders Dropped

German manufacturing orders dropped -0.4% month over month, a lower than expected number – we had been looking for a decline of -0.3% month over month and consensus expectations were for an unchanged reading. October numbers were revised up to 0.7 5month over month from 0.5% month over month and the unadjusted annual rate improved to 8.7% year over year. The weakness over the months reflects a dip in export orders as well as lower than usual large ticket orders, with orders excluding large ticket items rising 1.8% month over month.

UK Housing Prices Fell

UK house prices fell 0.6% month over month in December, according to the Halifax house price index, the firstly monthly decline since June last year, while the year over year comparison slowed to 2.7%, slowing from the 6.5% year over year increase that was seen in 2016. A gradual lift in mortgage rates, with average fixed-rate mortgages having risen between 0.1% and 0.2% since September, has dampened property prices in a market that was already stalling in the face of stretched valuations relative to income levels, incomes that have been eroded by inflation in 2017.

Eurozone Confidence Increased

Eurozone ESI economic confidence jumped to 116.0 from 114.6 in the previous month. Expectations had been for a modest improvement to 114.8, although preliminary consumer confidence data already came in higher than anticipated and PMI readings also improved, so the renewed rise in the overall ESI is not a total surprise and confirms that the Eurozone economy ended 2017 in buoyant mood. Industrial confidence jumped to 9.1 from 8.1 and the services reading came in at 18.4 in December, up from 16.4 in the previous month. Consumer confidence was confirmed at 0.5.

UK Housing Prices Fell

UK house prices fell 0.6% month over month in December, according to the Halifax house price index, the firstly monthly decline since June last year, while the year over year comparison slowed to 2.7%, slowing from the 6.5% year over year increase that was seen in 2016. A gradual lift in mortgage rates, with average fixed-rate mortgages having risen between 0.1% and 0.2% since September, has dampened property prices in a market that was already stalling in the face of stretched valuations relative to income levels, incomes that have been eroded by inflation in 2017.

Bundesbank President Weidmann Argues that the End of net asset purchases justified

According to El Mundo the Bundesbank President repeated again that inflation prospects suggest a return of headline rates toward target levels and stressed that monetary policy will remain very accommodative even after the end of net asset purchases. On a joint deposit insurance Weidmann repeated that with many banks still holding a large amount of risky assets these would have to be reduced first while stressing again the need to reduce the link between bank and public debt.

Swiss CPI Was Unchanged

Swiss December CPI remained at 0.8%, matching the rate in November and remaining at the highest since March 2011. The 9%-plus weakening in the franc over the last six months has been helping rekindle inflationary pressures in the Swiss economy, alongside the ultra accommodative monetary policy of the SNB.