EUR/USD Daily Technical Analysis for March 13, 2018

The EUR/USD edged slightly higher hovering just above support, as Friday’s mixed jobs report failed to generate a direction for the currency pair. While the headline jobs number was much stronger than expected, the wage number were subdued, weighing on U.S. yields.  The Fed’s Rosengren said that 4-rate highs will likely be need in 2018, which should help keep the greenback buoyed.

Technicals

The EUR/USD edged higher holding above support near the 10-day moving average at 1.2310.  Additional support is seen near the February lows at 1.2154. Resistance is seen near the March highs at 1.2445.  Momentum is neutral as the MACD (moving average convergence divergence) histogram prints near the zero index level with a flat trajectory which points to consolidation. The fast stochastic on the other hand has generated a crossover buy signal, which points to a higher exchange rate.

ECB’s Ceoure Said That Growth remains too reliant on monetary policy

ECB’s Ceoure Said That Growth remains too reliant on monetary policy. The executive board member said in an interview with BFM Business that Eurozone growth is “strong and well distributed”, but still too dependent on monetary policy adding that “inflation is not yet where we want it”. The Executive Board member also stressed again that interest rates “will remain low long after the end of” net asset purchases, thus following in Draghi’s footsteps and trying to play down the importance of last week’s tweak in the guidance on net asset purchases.

Fed hawk Rosengren earlier said 4 rate hikes are likely

Fed hawk Rosengren earlier said 4 rate hikes are likely needed this year, while regular, gradual rate hikes were appropriate. He did wonder whether a trade war or geopolitical surprise could derail policy tightening, but was equally encouraged by fiscal stimulus, large tax cut and overseas strength since the December FOMC. Rosengren characterized recent economic data as “good,” but seeking to avoid a “boom and bust” economy. He also anticipated firmer inflation and upward pressure on wages. A former dove, non-voter Rosengren has been burning hotter of late, though it is interesting to see the 4 rate hike comment come up in this regard. Stocks have since marked fresh highs, up some 1.4-1.5%, while Treasury yields have pulled back from earlier highs.

Atlanta Fed’s Q1 GDPNow estimate was trimmed

Atlanta Fed’s Q1 GDPNow estimate was trimmed to 2.5% from 2.8%, surprisingly in the wake of the firm jobs report: “The GDPNow model estimate for real GDP growth in the first quarter of 2018 is 2.5% on March 9, down from 2.8 percent on March 7. The nowcast of first-quarter real consumer spending growth fell from 2.5% to 2.2% and the nowcast of first-quarter real private fixed investment growth fell from 3.4% to 2.4% after the employment report from the U.S. Bureau of Labor Statistics. The model’s estimate of the dynamic factor for February normalized to have mean 0 and standard deviation 1 and used to forecast the yet-to-be released monthly GDP source data–declined from 1.62 to 0.96 after the employment report.”

The U.S. wholesale Inventories Missed Estimates

The U.S. wholesale report undershot estimates with a 1.1% January wholesale sales drop after a downwardly-revised 0.8% December gain, hence capping a five-month string of big 0.8%-1.9% increases. There was a 0.8% January inventory rise that beat the 0.7% increase in the advance report, following a boost in the November rise to 0.7%. A robust sales trajectory into year-end left room for the January pull-back, and weather may have had a temporary impact on growth. Inventories should generate a Q4 GDP growth boost to 2.8% from 2.5%, though with a $2 billion boost in wholesale inventories. The wholesale inventory-to-sales ratio bounced to 1.26 from 1.23 in the prior two months, and the overall business I/S ratio likely rose to 1.35 from 1.33 in both November and December.