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EUR/USD Daily Technical Analysis for April 27, 2017

By:
David Becker
Updated: Apr 26, 2017, 19:46 UTC

The EUR/USD moved lower declining down to 1.0855, and finishing the NY session off its lows at 1.0897.  The exchange rate is trading close to former

EUR/USD Daily Technical Analysis for April 27, 2017

The EUR/USD moved lower declining down to 1.0855, and finishing the NY session off its lows at 1.0897.  The exchange rate is trading close to former resistance near the March highs at 1.0906.  President Trump released his tax plan, at a press conference attended by Gary Cone the Budget Director and Treasury Secretary Mnuchin.

Technicals

The EURUSD consolidated Tuesday’s gains but remains above the break out level and is likely to test higher levels.  The yield differential between treasury and bunds was stable, ahead of Thursday European Central Bank meeting.  While Draghi is likely to keep a bullish tone, there will be pressure on him to acknowledge the recent string of better than expected economic data.

The currency pair was able to hold above support which is reflected by a downward sloping trend line that connects the highs in November to the highs in March and comes in near 1.0820.  Additional support is seen near the 10-day moving average at 1.0743.  Target resistance is now seen near the November 8, highs at 1.299.

Momentum on the currency pair remains positive as the MACD (moving average convergence divergence) index prints in the black with an upward sloping trajectory, which is reflected by a climbing MACD histogram. The MACD histogram level is the highest the index has been since December which reflects accelerating positive momentum.  The MACD generated a crossover buy signal in late April.

The RSI (relative strength index) is generating a bull flag pattern that is similar to the consolidation that is seen in the exchange rate.  It broke out above the 65 level, and has not come to test the print. The current print of 66, is on the upper end of the neutral range but below the overbought trigger level of 70.

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Trumps Tax Plan is Bullish Riskier Assets

The tax plan is a robust, reducing rates across the spectrum, dropping rates on both personal and corporate taxes.  The corporate rate is proposed to drop to 15%, and offer a onetime offer on revenue returned to the United States earned in foreign counties down to 10%. The plan would generate huge consumer spending and increase job growth given the huge stimulus that would come from trillions of dollars returning to the United States.

If this type of tax program is implemented, U.S. corporations that are domiciled in the United States would need to purchase huge some of U.S. dollars which could put a floor under the greenback, despite rising rates in Europe.

French Sentiment is Stable

There was little hard data on the European continent but sentiment continued to remain solid. French consumer confidence was flat in April, with the overall reading unchanged at 100. Future expectations for the unemployment outlook improved, but despite this the readings for the personal financial situation and purchasing opportunities fell back slightly. Overall though French confidence indicators have been positive which shows that the French economy is beginning to gain traction, with PMIs even suggesting that the pace of expansion is the strongest in Europe.

Germany Lifted Its Growth Rate

Germany lifted its growth forecast to 1.5% this year from 1.4% expected previously. The official spring economic outlook from the German Economy Ministry sees the German economy growing at a steady rate despite geopolitical risks. Growth is expected to remain stable compared to 2016 and imports are expected to growth faster than exports this year and next. In real terms net exports already made a negative contribution to growth last year, but with oil prices higher again, the nominal current account surplus is now also expected to trend lower. At the same time inflation is seen rising to 1.8% this year before falling back to 1.6% in 2018.

Home Prices Remain Robust

U.S. home prices increased more than expected in February, per S&P/Case-Shiller U.S. National Home Price Index. The national home price index increased by 5.8% in February, beating expectations that home prices to climb by 5.7%.  Home prices have now climbed to a 32-month high. There is a lack of inventory across the United States, as builders have not kept up with demand.  Additionally, if lumber prices rise, due to the proposed tariff on Canadian lumber, prices for existing homes will climb even higher.

Despite a Strong Stock Market Confidence Moved Lower

The Consumer Confidence Index dropped to 120.3 in April, according to the Conference board, softer than expected as analysts were anticipating the index to only fall to 122.9 for the month. The sentiment index last hit 125.6 in March, its highest level since December 2000.

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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