EUR/USD Daily Technical Analysis for June 27, 2017

The EUR/USD traded in a sideways pattern, despite a stronger than expected German IFO survey which failed to buoy the currency pair.  U.S. yields continued to trade on the defensive, as a soft Chicago National Activity index and a milder than expected Durable Goods Orders report, took the luster off the greenback.

Technicals

The EUR/USD formed a doji day pattern, which occurs when the open and the close are at the same level which reflects indecision. Prices appear to be forming a topping pattern, but were able to capture resistance which is now seen as short-term support near the 10-day moving average at 1.1174.  Resistance is seen near the monthly highs at 1.1296. Negative momentum also appears to be decelerating. The MACD (moving average convergence divergence) histogram is edging slightly higher while still printing in negative territory which reflects decelerating negative momentum. The relative strength index (RSI), which is a momentum oscillator that measures accelerating and decelerating momentum, is flat lining and printing a reading of 54, which is in the middle of the neutral range and reflects consolidation.

German IFO Unexpected Climbed for June

German June IFO confidence unexpectedly jumped to record high of 115.1 from 114.6 in the previous month. The current conditions indicator rose to 124.1 from 123.3 and the future expectations index to 106.8 from 106.5. Expectations had been for an unchanged reading. The diffusion index showed that manufacturing confidence improved only marginally, while construction confidence fell back slightly, but that this was more than compensated for by the sharp improvement in the wholesale index to 23.6 from 20.3 and a rise in the retail sales index to 16.0 from 11.4.

UK Consumer Credit Weakened in May

UK consumer credit data from the BBA showed weakening in May data, with consumer lending ebbing to a growth rate of 5.1% year over year, the slowest rate since October 2015. Mortgage approvals dipped to 40.3k, the lowest since last September, from 40.7k. Higher inflation, along with political uncertainties, are blamed for the tail-off in consumers’ demand for credit. The data precedes the June 8 election, but polls during May were showing the dramatic fall in support for the government. With UK Q1 GDP having slowed to just 0.2% quarter over quarter growth, versus 0.5% growth in the Eurozone, and 0.7% growth in the U.S., today’s BBA data is a concern with much of the UK’s growth in recent years having been driven by the consumer sector.

Conservatives in the UK Reach and Agreement

The Conservatives in the UK have reached an agreement with the Democratic Unionists which will see them support Theresa May’s minority government. The deal, which comes two weeks after the election resulted in a hung Parliament, will see the 10 DUP MPs back the Tories in key Commons votes.  The payoff will be an extra 1 billion for Northern Ireland over the next two years. DUP leader Arlene Foster said the “wide-ranging” agreement was “good for Northern Ireland and for the UK”.

U.S, Chicago Fed Nation Activity Index Dropped in May

U.S. Chicago Fed National Activity Index dropped to -0.26 in May after jumping to 0.57 in April (that was the highest print since 0.59 from March 2014; the index was as low as -0.84 in July 2013). The March reading was revised down to -0.18 from 0.07 previously, while February was bumped up to 0.23 from 0.15. Thirty two of the 85 indicators made positive contributions, while 53 made negative contributions.

U.S. Durable Goods Orders Fell More than Expected in May

U.S. durable goods orders fell 1.1% in May, weaker than expected, after a revised 0.9% April decline which was revised from -0.7%. Transportation orders dropped 3.4% following the 1.8% decline previously which was revised from -1.2%. Excluding transportation, orders were up 0.1% versus -0.5%. Nondefense capital goods orders excluding aircraft dipped 0.2% following the prior 0.2% gain which was revised from unchanged. Shipments rebounded a solid 0.8% from the 0.3% April decline which was revised from -0.4%. Nondefense capital goods shipments excluding aircraft, which is a proxy for business investment, fell 0.2% following April’s 0.1% gain was revised from -0.1%. Inventories were up 0.2% last month after edging up 0.2% in April which was revised form 0.1%.