EUR/USD Daily Technical Analysis for December 8, 2017

The EUR/USD edged lower as German Industrial Production dropped, and jobless claims moved lower buoying the greenback.  Eurozone GDP was confirmed but lower quarter over quarter but up year over year.  Private consumption slowed slightly and import and exports were neutral. Layoffs actually increased according to the U.S. Challenger report, which provides some insight into Friday’s payroll report.  The Fed is scheduled to meet next week, with a 25-basis points hike baked into the Fed Fund futures.

Technicals

The EUR/USD edged lower forming a doji day where the open and the close were at the same level which reflects indecision.  Prices did make a lower low, which shows that a downtrend is in place, with support seen near an upward sloping trend line that connects the lows in June to the lows in November and comes in near 1.1650.  Resistance on the currency pair is seen near the 10-day moving average at 1.1862.  Momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal.  This occurs as the MACD index (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 MACD histogram is printing in the red with a downward sloping trajectory which points to a lower exchange rate.

Eurozone Q3 GDP Rose

Eurozone Q3 GDP was confirmed at 0.6% quarter over quarter as expected and down from 0.7% quarter over quarter in the previous quarter. The annual rate was revised up slightly to 2.6% year over year from 2.5% year over year and the breakdown, which was released for the first time, showed surprisingly strong investment growth, with sizeable upward revisions to the second quarter.

Private consumption growth slowed down, and import Net exports were neutral for overall growth in the third quarter, as import growth, as well as export growth accelerated and the main contributors to growth, were consumption and investment. Inflation may remain lower than what the ECB would like to see but even Executive Board member Mersch admitted this week that wages and underlying inflation may have turned the corner and with forward-looking growth indicators coming in stronger than anticipated, the ECB’s monetary policy is starting to look too expansionary.

Spanish Housing Prices Accelerated

Spanish house price inflation accelerated to 6.7% year over year in the third quarter of the year, the highest annual rate since 2007. Anecdotal evidence also suggests that house prices are rising faster than anticipated and there are reports that U.K. buyers in particular are hitting the market in anticipation of Brexit, thus adding to the favorable impact of low interest rates and above average growth in the region.

German IP Unexpectedly Dropped

German industrial production unexpectedly dropped -1.4% month over month in October and while September was revised up to -0.9% month over month from -1.6% month over month reported initially, it still leaves production down for a second consecutive month. The numbers look at odds with strong orders numbers and survey data, but indicated a buildup in the backlog of orders that also squares with PMI reports. This would suggest that the weaker than expected production numbers are not a sign of weakening growth momentum, but at least partly a reflection of the fact that companies seem to be running into capacity constraints, and while the annual rate fell back to 2.7% year over year from 4.1% year over year, the growth rates remain robust so far.

U.S. Jobless Claims Dipped

U.S. initial jobless claims dipped 2k to 236k in the December 2 week after slipping 2k to 238k in the November 25 period. That brought the 4-week moving average down to 241.5k versus 242.25k previously. Continuing claims dropped 52k to 1,908k in the November 25 week, following the 45k climb to 1,960k previously which was revised from 1,957k. Claims are back near historic lows again as the distortions from the disasters and holidays have dissipated.

U.S. Challenger reported announced layoffs rose 5.2k to 35.0k in November, rebounding after the 2.5k decline to 29.8k in October. The computer and food industries led the layoffs. Compared to a year ago, planned job cuts are up 30.1% year over year versus -3.0% year over year in October and -27.0% in September. Cost cutting, and store closings were the main reasons for the job reductions. Meanwhile, holiday hiring plans are at 608.1k this year, led by Amazon’s plan to take on 120k seasonal workers, followed by Target at 100k and UPS at 95k.