EUR/USD Daily Technical Analysis for October 10, 2017

The EUR/USD moved higher following stronger than expected German production data but was unable to pierce through resistance levels.  Eurozone investor confidence improved in September, while the Bank of France Business sentiment index was unchanged. U.S, consumer credit rose in August, but the climb was above expectations.  The ECB’s Knot said that he believes that the market is underpricing current risks, which might be the calm before the storm.

Technicals

The EUR/USD moved higher running into resistance levels near the 10-day moving average at 1.1754.  Additional resistance on the currency pair is seen near the 50-day moving average at 1.1845.  Support is seen near Friday’s lows at 1.1669, and then the August lows at 1.1631. Negative momentum is decelerating as the MACD (moving average convergence divergence) histogram prints in the red but the trajectory is positive which points to consolidation.

The Eurozone Sentix Investor Confidence Improved in October

The Sentix Eurozone investor confidence improved again in October. The overall index rose to 29.7 from 28.2 in September with the current condition reading as well as the expectations reading picking up this month. Further signs that the Eurozone recovery continues to broaden and strengthen, which will add to the arguments of the hawks at the ECB.

The Bank of France Sentiment Was Unchanged in October

The Bank of France business sentiment unchanged at 104. The October production outlook though improved to 9 from 3 in the previous month, and October projections for services and construction activity also improved. This ties in with robust PMI readings and confirms that the recovery remains on track, as Macron tries to continue with his ambitious reform agenda.

U.S. Consumer Credit Rose in August

U.S. consumer credit rose $13.1 billion in August, a little below forecast, after the $17.7 billion surge in July which was revised down from $18.5 billion. June was bumped down as well to $11.5 billion from $11.8 billion. Non-revolving credit increased $7.3 billion higher after climbing $15.7 billion previously which was revised from $15.9 billion. Revolving credit rose $5.8 billion versus $2.1 billion previously which was revised from $2.6 billion.

German industrial production much stronger than anticipated

German industrial production much stronger than anticipated. Production rose 2.6% month over month in August, much more than expected, although not a total surprise after the strong orders number last week and the annual rate rose to 4.7% year over year from an already strong 4.2% year over year in July. Production and orders numbers can often be volatile over the July/August period due to the different timing of holidays across the German states. And while orders and survey data confirm that the recovery continues, the three months trend rate slowed down to 0.9%, from 1.1% in the three months to July and a marked slowdown from the peak of 2.5% in the three months to May. Ex-construction the slowdown is much more modest however, and it is mainly the construction sector that has been hit with a drop of -1.2% month over month in August. Manufacturing and mining actually jumped 3.2% month over month.

The ECB’s Knot Said the Market Is Underpricing Risk

ECB’s Knot suggests markets may be underpricing global risks. The council member said while market indicators suggest unprecedented calm “it increasingly feels uncomfortable to have low volatility in the markets on the one hand, while on the other hand there are risks in the global economy”. He warned that his makes the “risk of sharp market corrections real”, although he also stressed that “no one within the context of the ECB is already taking about an increase of interest rates”, adding that rates will “stay low for a long time”.

Catalonia to discuss independence bid, amid growing pressure

Catalonia to discuss independence bid, amid growing pressure. Spain’s regional parliament in Barcelona will discuss Catalonia’s bid for independence tomorrow. Regional leaders stressed they are open to negotiations, while the central administration in Madrid said it is ready to defend Spain’s unity. Spain warned that declaring independence unilaterally would also risk economic chaos and indeed it seems Catalonia would not only find itself outside of Spain but also the EU and the Eurozone and while some companies have started to move their headquarters to locations outside of Catalonia, it is difficult to see the region function in the short term.