EUR/USD Daily Technical Analysis for December 4, 2017

The EUR/USD edged slightly higher but formed a doji day which is where the open and the close are at the same level which reflects indecision. News during the North American Trading session allowed currency exchange rates to whipsaw.  First Mike Flynn the former National Security Advisor for the Trump administration plead guilty to one count of lying to the FBI.  Volatility was injected back into the market which saw the dollar tumble and stocks swoon.  This was followed by news that the U.S. senate had the votes to pass their tax bill which helped the markets stabilize.  Eurozone manufacturing PMI was revised higher but Italian Q3 GDP was revised lower.

Technicals

The EUR/USD bounced from support near the 10-day moving average at 1.1848.  Resistance is seen near a downward sloping trend line that comes in near 1.1996.  A break of this level would lead to a test of the September highs at 1.2090.  Positive momentum is decelerating as the MACD (moving average convergence divergence) histogram is printing in the black with a flat trajectory which points to consolidation.

Eurozone PMI Was Revised Higher

The Eurozone manufacturing PMI was revised up to 60.1 in the final reading from 60.0 reported initially and versus 58.5 in the previous month. This is the best performing since the height of the dot-com boom over 17 years ago and Markit reported that growth of output and new orders climbed to multi-year highs and supported survey-record job creation. PMI readings in Germany, the Netherlands, Austria and Ireland are at or near to record highs and the upswing was broad based across the Eurozone, with all countries surveyed reporting expansion for the sixth straight month. There is also a sharp uptrend in business investment on machinery as companies running into capacity constraints, which suggests that there is optimism that the boom will continue well into 2018. At the same time Markit reported a further build up of price pressures with output charges rising at the quickest pace since June 2011.

Italian Q3 GDP was Revised Lower

Italy Q3 GDP growth was revised down to 0.4% quarter over quarter from 0.5% quarter over quarter reported initially. This is still up from 0.3% quarter over quarter in Q1, but below the Eurozone average, confirming that the fourth largest Eurozone country continues to lag. The pickup in investment growth to 3.0% quarter over quarter from 1.1% quarter over quarter and in particular the surge in machinery investment growth to a whopping 6.0% quarter over quarter are encouraging, however. Export growth also accelerated to 1.6% quarter over quarter and net exports contributed 0.2% points to the quarterly growth rate, after detracting -0.4% points. Household consumption added a further 0.2% points, investment 0.5% points and only a negative contribution of -0.5% points from inventories prevented a stronger overall growth rate.

Germany Still in Limbo

Germany waiting for decision on possible coalition talks after SPD-CDU meeting. After Chancellor Merkel and SPD head Schulz met President Steinmeier Thursday, expectations are running high that Schulz may modify his strict “no” to a repeat of the grand coalition, although as the previous coalition talks with FDP and Green Party showed, the start of talks doesn’t necessarily mean that parties are able to come to an agreement. A Bild survey suggested only 22% of voters want a continuation of the coalition between SPD and CDU and within the SPD there is also a lot of resistance and if Schulz puts the final decision to a vote among party members, a positive vote is not secured.

UK PMI Hits 4-year High

U.K. manufacturing PMI hit a 52 month high in November. The U.K. CIPS manufacturing PMI came in higher than expected at a 52-month high of 58.2, with output, new orders and employment all expanding at a faster rate. Investment goods new orders in particular were strong and increased at the fastest pace since August 1994. Solid domestic demand and steeper gains in new export business underpinned the improvement.