EUR/USD Daily Technical Analysis for November 22, 2017

The EUR/USD traded in a very tight range in a holiday shortened week that sees both the U.S. and Japan out on Thursday.  The dollar initially gained traction after a stronger than expected home sales report which saw an increase in the U.S. by more than 2%.  The U.S. Chicago Fed National Activity index grew in October and Chain Store Sales increased in the latest week pointing to a strong holiday season.

Technicals

The EUR/USD bounced at support near the 10-day moving average at 1.1718, and is holding just above the neckline of a head and shoulder pattern, that failed to create a long liquidation. Resistance on the currency pair is seen near the November highs at 1.1860.  Positive momentum is decelerating as the MACD (moving average convergence divergence) histogram is printing in the black with a declining trajectory which points to consolidation.

U.S. Manufacturing is Higher

U.S. October Chicago Fed National Activity index rose 0.29 points to 0.65 after rebounding to 0.36 in September (revised from 0.17) after falling to -0.37 in August (revised from -0.37). That’s the highest since January 2012. Of the 85 monthly components that make up the index, 56 of them made positive contributions, while 29 were negative.

U.S. chain store sales rose 1.2% in the week ended November 18 to 116.6,  after dipping 0.6% to 115.2 previously. The 12-month pace slowed slightly to 2.4% year over year versus 2.6% year over year, and is down from 3.6% year over year in the November 4 week, which was the fastest clip since June 2016. The report noted consumers are starting to complete their holiday purchases earlier than recently has been the case, though it’s a little lower than that seen from 2010 through 2014.

The ECB’s Villeroy said the central bank has made “decisive step” towards the end of QE

The French central bank head told Dutch De Telegraaf that the cut back to EUR 30 billion with the new program was the second step towards phasing out purchases, adding that the end “will come, for sure”, but that the central bank will then “keep a high level of stock for the necessary period”, and that “policy is still accommodative” because inflation is still not in line with the ECB’s target. The central bank may have not officially committed to an end date for QE, but there are more and more indications that in the central scenario there won’t be another follow-on program beyond September next year.

Germany’s Schaeuble calls on parties to compromise in the search to find allies for Chancellor Merkel.

The new head of Germany’s parliament and former Finance Minister added his voice to that of German President Steinmeier, who also called on parties to try again to find a solution to the impasse that leaves Merkel with only the option of a minority government or new elections. Merkel already said that she would prefer the second option, but the there are fears that this would only strengthen the far right AfD and furthermore, that it would also leave Germany unable to make decisions on a European level for a prolonged period.

The ECB Villeroy said the central bank has made “decisive step” towards the end of QE.

The French central bank head told Dutch De Telegraaf that the cut back to EUR 30 billion with the new program was the second step towards phasing out purchases, adding that the end “will come, for sure”, but that the central bank will then “keep a high level of stock for the necessary period”, and that “policy is still accommodative” because inflation is still not in line with the ECB’s target. The central bank may have not officially committed to an end date for QE, but there are more and more indications that in the central scenario there won’t be another follow on program beyond September next year.

Trump boosted sanctions on N. Korea

Trump boosted sanctions on N. Korea which he said will now be designated as a state sponsor of terrorism, triggering further sanctions and penalties on the “murderous regime of N. Korea.” He also confirmed that the Treasury Department will announce further sanctions against N. Korea on Tuesday. He also endorsed the tax cuts working their way through Congress and confirmed that his administration aims to tackle healthcare, infrastructure and welfare reform once the tax overhaul has been completed.