EUR/USD Daily Technical Analysis for September 1, 2017

The EUR/USD rebounded from session lows, as the dollar lost traction following mixed economic data. Eurozone inflation was slightly better than expected while U.S. housing data along with personal income was mixed.

Technicals

The EUR/USD moved higher rebounded during the U.S. trading session, bouncing off support near the 10-day moving average at 1.1860.  Resistance is seen near the weekly highs at 1.2070. Momentum is neutral as the MACD (moving average convergence divergence) histogram prints in the black with a flat trajectory which points to consolidation.

Housing Data was Soft

U.S. pending home sales fell 0.8% to 109.1 in July after rising 1.3% to 110.0 in June. Sales have declined in five of the seven months so far in 2017. Regionally, sales fell in the South the Midwest and the Northeast. Compared to last July, sales slid to -0.5% year over year versus the 0.4% year over year gain in June. Lean inventories continue to be a headwind for sales, particularly in the West where annual sales are down -3.2% year over year.

Manufacturing was Stable

U.S. Chicago manufacturing PMI was unchanged at 58.9 in August after tumbling 6.8 points to that level in July. The index has ranged from 50.3 in January to 65.7 in June, which was the highest since the 66.1 from May 2014. The cycle low was 42.5 in December 2015. The index remains well up on the 51.8 in October. The 3-month moving average dipped to 61.2 from 61.3. The employment component declined to signal contraction, but new orders rose at a faster pace, while prices paid rose at a slower pace.

U.S. Income Rose but Spending Missed Expectations

U.S. personal income rose 0.4% while spending increased 0.3% in July. June’s flat reading on income was not revised, though spending bumped to 0.2% from 0.1%. Compensation rose 0.5%, the same as in June (revised from 0.4%), with wages and salaries up 0.5% versus 0.5% in June too. Disposable income rose 0.3% from unchanged. The savings rate dipped to 3.5% from 3.6% (revised from 3.8%). The PCE price index edged up 0.1% versus June’s flat reading, and is up 1.4% year over year, the same as in June. The core rate also rose 0.1% on the month after June’s 0.1% gain, with the annual rate slipping to 1.4% year over year from 1.5% year over year.

Jobs Data was Stable

U.S. initial jobless claims rose 1k to 236k in the week ended August 26 after edging up 3k to 235k in the August 19 week. The 4-week moving average dipped to 236.75k from 238k (revised form 237.75k). Continuing claims fell 12k to 1,942k in the August 19 week following an unchanged reading at 1,954 previously. The BLS said no state or territory estimated claims on the week.

U.S. Challenger reported announced layoffs rose 5.5k in August to 33.8k, after falling 2.8k to 28.3k in July. Planned job cuts are up 5.1% year over year versus -37.6% year over year. However, year-to-date reductions are down 26.1%. The construction industry announced the most job cuts for the month, while cost-cutting was the number one reason. For 2017 to day, cost-cutting remained the main reason, followed by closings and restructuring. Announced hirings declined 73.6k, more than unwinding the 48k increase in July.

Eurozone unemployment steady at 9.1% in July. Jobless numbers have improved steadily and overall the labor market is looking better than hoped a year ago, although further structural reforms remain necessary to reduce underlying unemployment and bring countries closer together. The harmonized German rate stands at just 3.7%, while neighboring France still reports a rate of 9.8%, which is actually up from 9.6% in the previous month.

Inflation Beat Expectations

Eurozone August HICP inflation rose to 1.5% year over year, a tad higher than initially expected, but not a surprise after national data from Germany, Spain and France. As we expected the uptick in the headline rate was mainly driven by a renewed acceleration in annual energy price inflation, which jumped to 4.0% year over year from 2.2% year over year in July. Core inflation remains at a modest 1.2% year over year, unchanged from the previous month.

German VDMA machinery orders rose 10% year over year in July, with domestic orders up 10% and export orders 9%, leaving the three months trend at 9%, up from 5% year over year in the three months to June. Further signs that the German manufacturing sector is doing well and that the economy continues to expand at a robust pace in the summer quarter.