EUR/USD Daily Technical Analysis for September 18, 2017

The EUR/USD consolidated on Friday hovering near the 10-day moving average, and down approximately a big figure for the week.  The big move on Friday came against the pound, which soared in value sending the EUR/GBP down for 6-consecutive days, losing more than 3-big figures on the week.  On the heels of Thursday’s BoE meeting, the BoE’s Vlieghe said a hike could come very soon, which helped the GBP gain against all-major currencies.

Technicals

Support on the EUR/USD is seen near the weekly lows at 1.1836, while resistance is seen near last week’s highs at 1.2092. Momentum on the currency pair remains negative as the MACD (moving average convergence divergence) histogram is printing in the red with a downward sloping trajectory which points to a lower exchange rate. The RSI continues to chop around, printing a reading of 56, which is in the middle of the neutral range which reflects consolidation.

The ECB’s Lautenschlaeger is Pushing for and Exit Strategy

he Executive Board member said the ECB must help markets to get an idea of how the exit from special policy measures will look. She admitted that inflation is picking up more slowly than expected, but believes the ECB needs make a decision on the current asset purchase program.  The program is scheduled to end in March 2018.

Eurozone Trade Surplus Narrows in July

The Eurozone posted a trade surplus of EUR 18.6 billion in July, down from EUR 21.7 billion in the previous month. Exports declined over the month, while imports picked up. Unadjusted data also show a narrowing of the trade surplus compared to July last year, with exports up 6.1% year over year and imports 8.2% year over year, with the trend for the first seven months of the year, showing an even stronger rise in imports. The strong EUR is leaving its mark as it boosts import demand. Export growth remains robust, but at least on a nominal basis, the trade surplus is narrowing, with the total for the first seven months of the year amounting to just EUR 130.2 billion, compared to EUR 154.1 billion in the first seven months of 2016.

Inflation in the U.S. is Edging Higher

Gasoline prices moved higher this month especially in Florida which should spill over into CPI. Cleveland Fed’s median CPI rose 0.2% in August, as did the 16% trimmed-mean. Both of those are alternative measures of core CPI, and are consistent with the BLS’s measure reported earlier. The 12-month median CPI posted a 2.2% year over year pace, with the trimmed-mean at 1.8% year over year, both firmer than the BLS’s 1.7% year over year clip. Though some of the surge is hurricane-inspired, the data will support the more hawkish contingent on the FOMC who continue to argue for one more rate hike this year, likely in December.

U.S. NY Manufacturing Stabilized at Higher Levels

U.S. September Empire State manufacturing index dipped 0.8 points to 24.4, after surging a surprising 15.4 points to 25.2 in August, which was the highest level since September 2014’s 30.2. The small give-back suggests last month’s surge wasn’t that fluky. Most of the key components gained. The employment index improved further to 10.6 from 6.2 previously and 3.9 in July. But the workweek basically halved back to 5.7 after rising to 10.9 from July’s unchanged. New orders rose to 24.9 from 20.6. Prices paid increased to 35.8 from 31.0, with prices received at 13.8 from 6.2. The 6-month general business activity index slipped to 39.3 following the climb to 45.2, with employment at 13.8 from 9.3, new orders at 43.7 from 41.3, and prices paid at 42.3 from 33.3, while capital spending was 24.4 from 11.6.

U.S. Retail Sales Dipped

U.S. retail sales fell 0.2% in August, with the ex-auto component up 0.2%, compared to expectations for a rise of 0.1% for the headline number and a 0.05% rise ex-auto.  The 0.6% July increase was revised down to 0.3%, with the prior 0.3% June gain bumped to -0.1, while the 0.5% ex-auto gain was nudged down to 0.4%, with June knocked to -0.2% from 0.1% June. Sales excluding autos, gas, and building materials, which factors into GDP, slid 0.1% versus 0.5% previously. Gas station sales rebounded 2.5% versus the prior 0.7% decline. Auto sales dropped 1.6% from unchanged previously (revised from 1.2%). Miscellaneous sales were up 1.4%, while non-store retailers declined 1.1%. Electronics store sales fell 0.7%, with building materials off 0.5%, while furniture rose 0.4%. Clothing sales declined 1.0%.

Sterling Continued to Rise

The BoE’s Vlieghe said a hike could come “as early as in the coming months” during a speech in London Friday. He said Friday that, “the evolution of the data is increasingly suggesting that we are approaching the moment when bank rate may need to rise.” This fits the tone of the BoE’s statement, which emphasized the dwindling spare capacity in the economy while hinting that it will likely upwardly shift inflation projections in the next quarterly edition of the inflation report in November.