EUR/USD Daily Technical Analysis for March 16, 2018

The EUR/USD moved lower on Thursday as a declining U.S. jobless claims figures and slightly higher than expected import prices into the United States, buoyed the greenback.  French inflation was confirmed as expected which did little to boost the EUR/USD exchange rate. Manufacturing figures for March in the U.S. were also robust giving the dollar a boost.

Technicals

The EUR/USD moved lower for the second consecutive trading session, dropping through support near the 10-day moving average at 1.2351. Target support is seen near the February lows at 1.2154.  Momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal.  The fast nature of the trajectory of the MACD histogram provides a neutral to negative bias to the MACD crossover sell signal. The fast stochastic also generated a crossover sell signal confirming the acceleration of negative momentum.

French February HICP inflation was confirmed as expected

French February HICP inflation was confirmed at 1.3% year over year, as expected, in line with the preliminary number and down from 1.5% year over year in January. A dip in prices for fresh food underpinned the dip in the headline annual rate. So no change to the picture from the preliminary overall Eurozone number that showed a decline in the headline rate, but steady core inflation. True, core also remains far below the ECB’s upper limit for price stability, but with the output gap evaporating faster than expected and the labor market continuing to improve, the medium term inflation outlook is suggesting a gradual pick up in headline rates.

Jobless Claims Edged Lower

The 4k initial claims drop to 226k in the second week of March trimmed last week’s 20k bounce to 230k as we fluctuate above the 48-year low of 210k at the end of February. Claims have tightened sharply in 2018 despite the lift over the last two weeks, with likely help from tax reform and anticipated spending related to the budget bill that is filling the void of diminishing disaster rebuilding. Claims are averaging 227k in March, which is above the super-lean 222k average in February, but below prior averages of 232k in January and 242k in both November and December. Next week’s BLS survey week reading looks poised to lie near the 220k February figure, versus prior BLS survey week readings of 216k in January, 245k in December and 240k in November.

U.S. import prices rose

U.S. import prices rose 0.4% in February with export prices up 0.2%. The 1.0% jump in January import prices was revised down to 0.8%, while the 0.8% export price gain was not revised. On a 12-month basis, import prices rose to a 3.5% year over year pace versus 3.4% year over year while export prices slowed to a 3.3% year over year rate from 3.4% year over year. Petroleum import prices fell 0.5% from the prior 3.0% gain. Excluding petroleum, prices were also 0.5% higher from 0.5% previously. Food, beverage import prices rose 1.1% from 0.8%. Industrial supplies prices, the major culprit behind the January strength, edged up 0.3% after the 2.4% gain. For exports, agricultural prices were up 0.6% from 0.1%. Excluding ag, export prices rose 0.2% from 0.8%. Industrial supplies prices edged up 0.3% from the prior 2.0% surge.

SNB on hold and in wait and see stance

SNB on hold and in wait and see stance. The SNB decided to maintain its expansionary policy stance and keep the interest on sight deposits as well as the mid point of the Libor target unchanged at -0.75%. At the same time the SNB repeated that it “will remain active in the foreign exchange market as necessary, while taking the overall currency situation into consideration”. The central bank’s conditional inflation forecast shifted slightly lower as “a result of the somewhat stronger Swiss franc”, with the headline rate now seen at 0.6% this year, versus 0.7% expected in December last year. the forecast for 2019 was cut back to 0.9% from 1.1% expected previously and the forecast for 2020 is 1.9%. The high rate anticipated for 2020 somewhat counterbalances the downward revisions to the forecasts for this year and next especially given the time lag with which monetary policy operates. The SNB also noted the further improvement in capacity utilization as well as the decline in the unemployment rate, following a stronger than expected annualized growth rate of 2.4% in Q4 last year. For 2018 the central bank expects growth of around 2% and the statement once again highlighted that imbalances on the mortgage on real estate markets persist.