EUR/USD Daily Technical Analysis for April 26, 2017

The EUR/USD broke out on Tuesday surging above the March highs, as riskier assets continued to gain traction, and yield in Europe outpaced their U.S. counterparts.  The yield differential moved in favor the Euro, as European sentiment moved higher. The CAC 40 continues to climb, after surging more than 4% Monday on stronger than expected confidence figures.

Technicals

The EURUSD surged higher on Tuesday breaking through the March highs near 1.0906, which is now seen as short term support.  The exchange rate made its way above a downward sloping trend line that connects the highs in November to the highs in March and comes in near 1.0820.  This nearly coincides with the 200-day moving average at 1.0837.  If the EUR to USD exchange rate does not hold these elevated levels, there is additional support near the 10-day moving average at 1.0721.

Momentum on the currency pair is positive as the MACD (moving average convergence divergence) index recently generated a crossover buy signal. This occurs as the spread (the 12-day moving average minus the 26-day moving average) crosses above the 9-day moving average of the spread. The index is now printing in the black with an upwards sloping trajectory which reflects accelerating positive momentum which points to a higher exchange rate.

The RSI (relative strength index) moved higher with price action breaking through resistance near the March highs at 67.  This reflects accelerating positive momentum. The current print on the RSI is 70, which is above the overbought trigger level of 70 and could foreshadow a correction in the EUR/USD exchange rate.

French Sentiment Surged in April

French manufacturing confidence jumped higher in April, with the reading rising to 108 from 105 in the previous month. The overall business confidence number remained steady though, and while past production numbers increased sharply, the future production outlook fell back to 1 from 3. Interestingly though, the own company production outlook improved, and the renewed dichotomy between the assessment of the overall climate and the situation at company level is also likely to reflect political and economic uncertainty in a wider context. Overall though numbers remain positive and with the strong PMI readings suggest the French recovery is finally gathering steam.

German Services Sentiment Declined in April

German services sector confidence eased in April, according to the Ifo institute, which put the overall reading for April at 107.8, down from 108.3 in the previous month. The current conditions indicator fell to 116.1 from 116.9 and the expectations reading to 100.0 from 100.3. This main Ifo yesterday still improved, but the expectations index also dipped and it seems the dynamic of the German economy is slowly easing, while France and other Eurozone countries are catching up.

UK Government Borrowing Increased

UK government borrowing fell GBP 20 billion in the year to March to a total of GPB 52 billion in the net figure excluding public sector banks figure. On the month, net borrowing rose by GBP 5.1 billion, more than the GBP 3.1 billion figure forecast by economists. Total government debt, excluding banks, rose to 86.6% of GDP, up from 83.6% in March last year.

U.S. stocks Increase Investor confidence as Nasdaq Hits Fresh Highs

Bullish momentum on U.S. equities remained intact after Trump deferred his wall funding deadline and opted to push for a 15% corporate tax rate instead as he approaches the 100-day horizon on Saturday, even though that could put him at odds with fiscal conservatives in his own party. Hot on the heels of the relief rally following the Macron lead in France, that extended the rotation out of bonds and back into riskier stocks.  The Nasdaq hit a fresh all-time high slicing through the 6K level, driving by large cap tech stocks which are scheduled to release earnings this week and next.  Home improvement stocks also soared, driving the S&P 500 index to all-time highs, as financials were also buoyed as yields moved higher across the globe.

U.S. Chain Store Sales Rose in the Latest Week

U.S. chain store sales rose 0.6% in the week ended April 22, according to The Retail Economist data, in the first post-Easter week, following the prior week’s 0.7% gain. It’s a third consecutive weekly increase, not seen since late November. But sales growth remains moderate. Compared to last year, sales are up 0.9% year over year versus 0.8% year over year, and is the fastest since the 1.5% year over year clip from March 25.