EUR/USD Daily Technical Report for April 21, 2017

The EUR/USD moved higher early in the trading session as European yields backed up ahead of this Sunday’s French elections.  French bond and stock markets managed to outperform as Macron seems to extend his lead going into Sunday’s election, which is shaping up to be a tight four-way race.  German PPI was softer than expected, while U.S. manufacturing and Jobless claims did little to buoy the dollar.

Technicals

The EURUSD was nearly unchanged on the trading session, having initially tested resistance near a downward sloping trend line that connects the highs made on election day in the U.S. in November and the highs in March that comes in near 1.0800.  Support on the currency pair is seen near the 10-day moving average at 1.0650.  Momentum on the currency pair remains positive as the MACD (moving average convergence divergence) index recently generated a crossover buy signal. This occurs as the spread (the 12-day moving average minus the 26-day moving average) crosses above the 9-day moving average of the spread.  The index is printing in the black with an upward sloping trajectory which points to a higher exchange rate.

The hourly chart shows that the exchange rate broke out above resistance seen near the 107 handle, and continue to trade above this level.  A break below this level would push the exchange rate back into a lower range floored near 1.0575. Short term resistance is seen near the 10-hour moving average at 1.0745.  Momentum on an hourly basis is negative as the hourly MACD generated a crossover sell signal.

Eurozone Construction Output Surged in February

Eurozone construction output surged 6.9% month over month in February, more than compensating for the -2.4% month over month contraction in the previous month and lifting the annual rate to 7.1% year over year, from -5.1% year over year at the start of the year. Varying weather conditions are partly to blame for the volatility in monthly numbers, but rising house prices and easy financing conditions are generally underpinning construction trends, even if conditions to vary largely across countries.

German PPI Printed Below Forecasts

German PPI inflation steady at 3.1% year over year in March, unchanged from the previous month and a tad below our forecast and median of 3.2% year over year. Energy prices dropped over the month in March and contributed to a large extend to the steady headline rate. Excluding energy, however, PPI accelerated markedly to 2.6% year over year from 2.2% year over year in the previous month and versus just 0.6% year over year in December.

U.S. Philly Fed Was Softer Than Expected

U.S. Philly Fed manufacturing index fell 10.8 points to 22.0 in April following the 10.5 point drop to 32.8 in March. Those follow the surprisingly strong 19.7-point surge to 43.3 in February which was the highest level since January 1984, and compares to the record high of 49.5 in July 1983. But the components were mixed. The employment index edged up to 19.9 from 17.5, with the workweek at 18.9 from 18.5. New orders eased back to 27.4 from 38.6. Prices paid fell to 33.7 from 40.7 with prices received at 16.6 from 20.6, corroborating the slide in some other price measures. The 6-month business activity index fell to 45.4 from 59.5. The future employment gauge was little changed at 37.6 from 38.5, with new orders at 55.9 from 61.0, and prices paid at 34.7 from 55.7, while prices received were 28.6 from 40.2. The 6-month capital spending figure inched higher to 36.5 from 34.5.

Jobless Claims Rose in Latest Week

U.S. initial jobless claims rose 10k to 244k in the week ended April 15 after slipping 1k to 234k previously, which followed the 24k plunge to 235k for the April 1 week. The 4-week moving average fell to 243k from 247.25k. Continuing claims declined 49k to 1,979k in the April 8 week after dropping 7k to 2,028k previously. That’s a 17-year low. Claims may have been impacted by the Good Friday holiday.

Fed’s Power Stayed on Point

Fed Governor Powell stuck to regulatory issues and didn’t really discuss monetary policy per se in his prepared remarks to The Global Finance Forum. He noted that while the economy has largely recovered from the financial crisis, but warned that all is not well as GDP growth has managed only about a 2% rate, held down by the weakest sustained pace of labor productivity growth since WWII. Meanwhile, the financial system has strengthened, with the largest financial institutions holding “much higher levels of higher quality capital.” He did note, though, that some aspects of the new regulations have proven “unnecessarily burdensome” and some changes are necessary.