EUR/USD Daily Technical Analysis for March 6, 2018

The EUR/USD moved higher as the dollar lost ground as U.S. yields backed up but at a slower rate than their European counterparts.  Investor sentiment in Europe dipped, and ratail sales were down but in line with expectations. The Italian election over the weekend generated a hung parliament and Germany now appears to have a clear new leadership.

Technicals

The EUR/USD pushed above resistance near the 10-day moving average at 1.2287, which now appears to be short-term support.  Resistance is the February highs at 1.2555.  Negative momentum is decelerating as the MACD (moving average convergence divergence) histogram prints in the red with an increasing trajectory which reflects consolidation.

Eurozone Sentix investor survey dips sharply in March

Eurozone Sentix investor survey dips sharply in March. The sentix economic index fell by 7.8 points to 24, with the institute warning that expectations are clearly losing growth, to a large extent as a result of the deterioration in Germany, where expectations are now negative with investors fearing that the boom threatens to turn into a downturn. However, the deterioration in sentiment is pretty broad based and Trump’s comments on punitive tariffs are giving investors a great deal of thought.

Eurozone retail sales down

Eurozone retail sales down -0.1% month over month, in line with consensus and with upward revisions to the December number, the annual rate still lifted to 2.3% year over year from 2.1 %year over year in the previous month. The breakdown showed a sharp decline in mail order and internet sales of -1.1% month over month, after a drop of -2.2% month over month in that category in December. Two months of corrections in internet sales, after a 4.6% month over month rise in November, which suggests that consumers increasingly bring forward Christmas shopping. A different seasonal pattern seems to be evolving then, that is not fully reflected yet in the monthly figures. Judging by annual rates alone, retail sales growth continues to look robust.

Germany’s Merkel clears last hurdle

Germany’s Merkel clears last hurdle to become Chancellor once again. It has been a long and drawn out process, but the way is finally clear for another another grand coalition government under Chancellor Merkel. Merkel’s CDU had to concede major posts in the coalition agreement, including the Finance Ministry to the SPD, but until about 2 weeks ago there were still some doubts whether SPD party members would endorse the deal.

Populists triumph in Italian election

Populists triumph in Italian election. The Italian elections were a major success for anti-establishment and anti immigration parties, leaving the Five Star Movement as the largest single party. In theory Five Start and the separatist former Northern League, which widened its base by fighting on an anti-immigration platform, would have a majority, in practice the League belongs to the center right block around Berlusconi in Italy’s multi party system, that is dominated by coalitions. The main losers were the left parties and the current government.

The UK’s February services PMI beat expectations

The UK’s February services PMI beat expectations, with the headline rising to a best-in-four-months 54.5 reading after 53.0 in January. The median forecast had been for 53.3. The survey found the strongest upturn in new work since May 2017, a rise in job creation, while input cost inflation dipped to the lowest rate in 18 months, driving a moderation in prices charged. A benefits of the strong global economy was cited by survey respondents in the service sector, helping offset the ongoing erosion in average real incomes. The survey also showed a rise in the backlog of incomplete business, with Markit, the compiler of the PMI surveys, noting anecdotal evidence showing that difficulties in recruiting suitably skilled staff were pressuring operating capacity.