EUR/USD Daily Technical Analysis for September 11, 2017

The EUR/USD hit fresh 2-year highs on Friday but were unable to hold gains into the weekend. The Draghi induced rally on European bond markets came to an end and yields are moved back from lows. The ECB may have deferred the decision on the future of asset purchases until October, but that monthly purchases levels will be scaled back from January is clear, even if the strong EUR means the ECB is reluctant to commit to an end date for the APP program.

Technicals

The EUR/USD hit a fresh high of 1.2091, which is now seen as short-term resistance, as the market is poised to test the November 2014 highs at 1.2569. Support on the exchange rate is seen near the 10-day moving average at 1.1937.  Momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. The MACD histogram is printing in the black with an upward sloping trajectory which points to a higher exchange rate for the EUR/USD.

German Labor Cost Rose

German labor costs rose 2.3% year over year in the second quarter, with gross earnings rising 2.9% year over year and non-wage costs up 0.3% year over year. Gross earnings picked up markedly from the 1.6% year over year registered in the first quarter of the year, reflecting an increasingly tight labor market. German wage growth is above the Eurozone average and for the Eurozone as a whole though Draghi is still not happy with wage developments.

French Industrial Production Rebounded in July

French industrial production rebounded in July, with manufacturing rising 0.3% month over month, after falling -0.9% month over month in June, while overall industrial production rose 0.5% month over month, after a drop of -1.1% month over month in the previous month. Annual rates reached 3.5% for manufacturing and 3.1% year over year for the industrial sector as a whole. Strong numbers that confirm that the Eurozone recovery is strengthening across countries, which is backing the ECB’s optimistic stance on growth.

German Posted A Trade Surplus

Germany posted a trade surplus of EUR 19.5 billion in July, down from EUR 21.2 billion in the previous month, as export growth of just 0.2% month over month, was dwarfed by a 2.2% month over month rise in imports. Unadjusted data show a surplus of EUR 19.5 billion, up from EUR 19.1 billion in July last year and bringing the total of 2017 so far to EUR 141.8 billion, down from EUR 148.4 billion in the seven months to July last year. This is nominal data, but the rise in imports also shows that the stronger EUR is underpinning import demand.

UK July production and Trade data came in Near Expectations.

Industrial production expanded by 0.2% month over month and by 0.4% year over year, compared to 0.5% month over month and 0.3% respective growth figures in the month prior. The median forecasts had been for 0.2% month over month and 0.3% year over year outcomes. The narrower manufacturing output figures posted growth of 0.5% month over month and 1.9% year over year, up from 0% month over month and 0.6% year over year in June. The median forecasts for manufacturing production had been for more moderate growth of 0.3% month over month and 1.6% year over year. The overall trade balance was GBP 2.7 billion, near unchanged from the GBP 2.9 billion figure for June after the latter was revised quite sharply lower, from GBP 4.6 billion.

The U.S. Senate and House Passed a Hurricane Aid Bill

U.S. Senate passed the $15.25 billion debt limit, hurricane aid bill, as expected following the bipartisan agreement yesterday for a 3-month suspension of the ceiling. The vote was 80-17. The bill will now go to the House, which is also expected to pass it, due to the urgency for funding relief measures. Treasury yields remain lower as a potential funding crisis and government shutdown has been averted for now. Though the debt ceiling will be restored in early December, the Treasury will be able to use its extraordinary powers to extend its borrowings until early, mid-2018. Note that the president and Senate Democratic leader Schumer are reportedly working on a bipartisan deal to permanently repeal the ceiling.