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EUR/USD Daily Technical Analysis for March 26, 2018

By:
David Becker
Published: Mar 23, 2018, 17:55 UTC

The EUR/USD moved higher as the EU called for a permanent exemption from U.S. tariffs.  The rebound came despite a stronger than expected increase in U.S.

U.S. Dollar Index

The EUR/USD moved higher as the EU called for a permanent exemption from U.S. tariffs.  The rebound came despite a stronger than expected increase in U.S. durable goods orders which was offset by a decline in new home sales.

Technicals

The EUR/USD edged higher testing resistance near a downward sloping trend line at 1.2360.  Short-term support is seen near the 10-day moving average at 1.2333.  Additional support is seen near an upward sloping trend line that comes in near 1.2260. Momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line). The fast stochastic generated a crossover buy signal which also points to a higher exchange rate.

EU calls for a permanent exemption from US tariffs

It appears as though the EU won at least a temporary exemption from Trump’s tariffs on steel and aluminium but as the European Council is ongoing European Council President Tusk twittered this morning that the EU calls for a permanent exemption, and “recalls commitment to strong transatlantic relations as a cornerstone of security, prosperity for US, EU and undermines support for dialogue on trade issues of common concerns”. Meanwhile, the council has published its updated conclusions with a new clause saying it “regrets” the U.S. decision to impose tariffs on steel and aluminum. So far it seems an escalation of the trade tensions at least between the U.S. and the EU has been avoided, but the trade war with China appears to gather strength.

EU adopted guidelines for future EU-UK talks

European Council President Tusk confirmed the widely expected decision this morning, which shows the way to a transition deal and trade talks remains on track. The guidelines seem unchanged to what was agreed earlier in the week and officials are aiming for an ambitious deadline this year to get a wider agreement on trade terms, in order to rubber stamp the transition deal and get the final package through European Parliaments before the U.K. officially exits the U.K.

Japan’s core CPI improved

Japan’s core CPI improved to a 1.0% year over year pace in February from the 0.9% rate of annual increase in January. Total CPI climbed to a 1.5% year over year clip from 1.4% in January. The core rate is the fastest pace since the 2.2% year over year gain in March of 2015, which gave way to -0.5% rates of decline from July to September of 2016. The BoJ’s target is a 2% core rate, so we are now half way there. However, the beating drums of global trade war threaten Japan’s export oriented growth engine, while the appreciating yen is a headwind to exports and inflation.

Canada retail sales expanded 0.3% in January month over monthafter a revised 0.7% drop in December which was -0.8%. The retail sales ex-autos aggregate grew 0.9% in January following the revised 1.7% plunge in December which was -1.8%. Retail sales volumes grew 0.1% in January, mildly supportive of our 0.1% projection for January GDP.

U.S. durable goods orders rebounded

U.S. durable goods orders rebounded 3.1% in February after dropping a revised 3.5% in January. Transportation orders climbed 7.1% versus -9.8% and were up 1.2% excluding transportation from a 0.2% decline which was revised from -0.3%. Nondefense capital goods orders excluding aircraft surged 1.8% from -0.4% which was revised from -0.2%. Shipments increased 0.9% following a 0.5% gain previously which was revised from 0.2%. Nondefense capital goods shipments excluding aircraft were up 1.4% after edging up 0.1% which was revised from -0.1%. Inventories rose 0.4% after the 0.4% January gain (revised from 0.3%). This looks like a solid report that recoups the January weakness.

U.S. homes sales unexpectedly declined

U.S. homes sales unexpectedly declined in February, weighed down by steep declines in the Midwest and West.  According to the Commerce Department new home sales dropped 0.6% to an annual rate of 618,000 units last month. January’s sales pace was revised up to 622,000 units from the previously reported 593,000 units. Expectations were for new home sales to rise by 4.4% in February. Permits increased by 0.5% from a year ago.

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.

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