EUR/USD Daily Technical Analysis for July 3, 2017

The EUR/USD hit fresh 12-month highs this week, giving back some of its gains on Friday but remaining above the 1.14 handle.  Hawkish comments from the ECB’s Draghi during the week, helped lift the Euro, while the data in the United States was less than stellar, allowing the yield differential between U.S. Treasuries and European core yields to narrow, paving the way for a higher EUR/USD currency pair.

Technicals

The EUR/USD gave back some of its recent gains, after climbing as high as 1.1445 on Thursday.  Resistance on the currency pair is seen near the 1.1465 June 2016 highs, with support seen near the 10-day moving average at 1.1253. Momentum has turned positive as the MACD (moving average convergence divergence) index recently generated a crossover buy signal. This occurs as the spread (the 12-day exponential moving average minus the 26-day exponential moving average) crosses above the 9-day exponential moving average of the spread. The index moved from negative to positive territory confirming the buy signal. The MACD histogram is printing in the black with an upward sloping trajectory which points to higher prices for the exchange rate.  The weekly MACD has also generated a crossover buy signal, which should continue to underpin the exchange rate.

Eurozone HICP Inflation Dipped in June

Eurozone June HICP inflation fell back to 1.3% year over year from 1.4% year over year in the previous month. The number was slightly above expectations of a 1.2% increase. Core inflation rose to 1.1% year over year from 0.9% year over year. The fact remains that the ECB is heading for QE tapering from early next year, even if Draghi remains reluctant to commit to reduced purchase volumes just yet.

French Consumer Spending Increased in May

French consumer spending jumped 1.0% month over month in May, after 0.3% month over month in April. The annual rate lifted to 1.3% year over year from -0.5% year over year and together with the positive German retail sales data at the start of the session the numbers back expectations for ongoing positive contributions from consumption to overall growth.

French June Inflation Dipped in June

French June HICP inflation fell back to 0.8% year over year from 0.9% year over year in the previous month. The data were in line with expectations, with prices unchanged month over month. Germany’s unexpected rise in the HCIP rate yesterday looks increasingly like the odd one out.

Swiss KOF June Leading Indicators Beat Expectations

Switzerland’s KOF Institute June leading indicator beat forecasts, rising to a headline reading of 105.5, up from 102.0 in May, which was itself revised upward from 101.6. The median forecast had been for a more modest rise to 102.5. The indicator attempts to portend economic activity six months down the track.

German Jobless Numbers Unexpectedly Increased in June

German jobless numbers unexpectedly rose 7K in June, against expectations for a renewed decline. The seasonally adjusted rate remained unchanged at 5.7% however, indicating that the labor market remains tight. So far though, this hasn’t seen wage growth lift to the extent the ECB would like to see.

German Retail Sales Rebounded in May

German May retail sales came in a tad better than anticipated, with sales rebounding 0.5% month over month, after falling -0.2% month over month in April. The three months trend rate rose to 1.1% from 1.0% in the three months to April. The annual rate still fell back to 1.2% year over year from 1.4% year over year. Nevertheless, a robust number, although official retail sales are a volatile indicator and only cover a part of consumption. Consumer confidence indicators meanwhile have been buoyant, suggesting ongoing support from private consumption to domestic demand and overall growth.

UK Q1 GDP Was Unchanged

The third and final release of UK Q1 GDP came in unrevised at 0.2% quarter over quarter and 2.0% year over year growth, as expected, which follows 0.7% quarter over quarter and 1.9% year over year growth in the previous quarter. Growth was driven by business services and construction, while consumer-focused industries, such as retail sales and accommodation, had a negative influence on growth. At 0.2%, the quarterly growth figure is below the 0.5% average rate that has been seen since 2010. Sterling is trading fractionally lower in the wake of the data release.