EUR/USD Daily Technical Analysis for November 17, 2017

The EUR/USD consolidated after surging higher earlier in the week with the exchange hovering near the 50-day moving average at 1.1780.  Stronger than expected import prices in the U.S. were offset by climbing jobless claims and subdued Eurozone inflation.

Technicals

The EUR/USD currency pair stabilized below support near the 50-day moving average while support is seen near the 10-day moving average at 1.1672.  Momentum remains positive as the MACD (moving average convergence divergence) index recently generated a crossover buy signal. This occurs as the MACD line (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).

Praet said the ECB must remain patient and persistent.

The Executive Board member said in the text of a speech that the recalibration of asset purchases “reflects growing confidence in the gradual convergence of inflation rates towards out inflation aim”, as the economy is “experiencing a solid and broad-based economic expansion that is contributing to a narrowing of the output and unemployment gaps”. Praet highlighted however, that “there still appears to be a disconnect between growth and inflation” and while the ECB seems confident that the “traditional Phillips curve relationship between inflation and the business cycle should eventually reassert itself, Praet repeated that the central bank has “not yet accomplished” its mission and must remain “patient and persistent”.

Eurozone Inflation was Stable in October

Eurozone October HICP inflation was confirmed at 1.4% year over year, with prices up 0.1% month over month. Core decelerated to 0.9% year over year from 1.1% year over year, as energy price inflation decelerated to 3.0% year over year from 3.9% year over year. Services price inflation also dipped as prices for package holidays declined. A weak number then that will have backed up the doves at the last council meeting, but impacted by special factors and survey indicators suggest underlying inflation pressures are starting to build up as manufacturing sectors in some countries are running into capacity constraints.

U.S. Import Prices Rose

U.S. import prices increased 0.2% in October with export prices unchanged, both below forecasts. The September import price gain of 0.7% was revised up to 0.8. The 0.8% September export jump was bumped down to 0.7%. On a 12-month basis, import prices downshifted to a 2.5% year over year pace versus 2.7% year over year, with export prices at 2.7% year over year from 2.8% year over year which was revised from 2.9%. For imports, petroleum prices were 1.7% higher after climbing 6.3% previously. Excluding petroleum, import prices edged up 0.1% versus 0.4% which was revised from 0.3%. Industrial supplies prices were up 1.1% from 3.1% which was revised from 2.4%. Import prices with Canada climbed 1.4% and were unchanged with China. On exports, agricultural prices rebounded 1.9% following the prior 0.7% drop. Excluding ag, export prices fell 0.3% following the 0.9% gain. Industrial supplies prices declined 1.0% from 2.7% previously.

Jobless Claims Rebounds

U.S. initial jobless claims rose another 10k to 249k in the November 11 week after rising 10k to 239k in the November 4 week. That brought the 4-week average to 237.75k from 231.25k. Continuing claims dropped 44k to 1,860k in the November 4 week, the lowest since December 1973, after rebounding 20k to 1,904k previously. Data were in part affected by the November 11 Veteran’s Day holiday, with the hurricanes still impacting Puerto Rico

UK Retail Sales Beat Forecast

UK October retail sales beat forecasts, rising by 0.3% month over month versus the median forecast for a more modest expansion of 0.1% month over month. This followed a 0.7% contraction in the prior month. The year over year figure contracted by 0.3%, better than the median forecast for a 0.5% shrinkage, following an unusually strong rise in October 2016. The underlying trend remains one of growth, with the three-month on three-month measure rising by 0.9%. Sterling has rallied against the dollar and other currencies in the wake of the data release, as markets had been primed for a downside shock in light of weak BRC and CBI October surveys. The official data provides some relief, and follows yesterday’s UK labor market report that found wages ticking up a little more than expected, albeit still off the prevailing inflation rate, and unemployment remaining at a 40-year low.