Yahoo Finance EUR/USD Daily Technical Analysis for January 22, 2018
The EUR/USD continued to trade in a tight range, initially attempting to break higher, but unable to gain traction. The Eurozone current account surplus widened, but German producer prices dropped back, generating both headwinds and tailwinds. The ECB’s Coeure said that the Eurozone not in recovery, but expansion. Sentiment in the U.S. was in line with expectations, while UK retail sales disappointed.
Technicals
The EUR/USD generated a doji day, trying to initially break out but the exchange rate was met with resistance, and the currency pair closed where it opened. The exchange rate is forming a bull flag pattern which is a pause that refreshes higher. Support is seen near the 10-day moving average at 1.2127, while resistance is seen near the weekly highs at 1.2323. Momentum is positive but not accelerating as the MACD (moving average convergence divergence) histogram prints in the black with a flat trajectory which reflects consolidation.
Eurozone Current Account Surplus Widens
Eurozone current account surplus widened in November, to a EUR 32.5 billion from EUR 30.3 billion in the previous month. The unadjusted financial account showed a direct and portfolio investment inflows of EUR 15.3 billion, bringing the total for the 12 months to November 2017 to EUR 463.3, down from EUR 614.8 billion. Portfolio investment trends showed sharp net outflows of equity investment, while net inflows in portfolio investment in debt instruments helped to limit the overall impact on net portfolio flows, which nevertheless declined in the 12 months to November 2017, compared to the 12 months to November 2016. The accumulated current account surplus meanwhile widened slightly, but not sufficient to compensate for the narrowing of the surplus in net portfolio and direct investment inflows, which in theory should suggest less support from flow trends for the EUR/USD.
German Producer Prices Drop Back
German producer price inflation dropped back to 2.3% year over year in December from 2.5% year over year in the previous month, with prices up 0.2% month over month. Base effects from basic goods and non-durable goods items were the main driving factors behind the deceleration in the annual rate, with energy price inflation actually accelerating slightly to 3.1% year over year from 3.0% year over year in the previous month. PPI readings remain above the ECB’s 2% limit for price stability for a while and the three months trend rate remained at a high 0.7%, a marked acceleration from the 0.1% in July last year, which will keep Weidmann calling for a quick end to net asset purchases.
ECB’s Coeure said the Eurozone not in recovery, but expansion
ECB’s Coeure said the Eurozone not in recovery, but expansion. ECB Executive Board member Coeure sounded pretty optimistic on the outlook for the Eurozone economy and said ECB ha stopped saying it wants to strengthen the recovery. “It is not a recovery anymore, it is an expansion”, adding that “it is not about moving out of the previous crisis, it is about preparing for the next crisis”. Coeure already suggested if things go according to plan, the current QE program could be the last and the comments suggest that he remains pretty optimistic on growth.
UK Retail Sales Disappointed
UK retail sales disappointed in official December data, dropping 1.5% month over month, more than the 0.6% month over month decline anticipated by the median forecast. The year over year figure came in with 1.4% growth, well off the median forecast for 2.6% growth. November data were revised slightly lower, too, to 1.0% month over month growth, down from 1.1% month over month, and to 1.5% year over year growth from the 1.6% year over year figure initially reported. The ONS stats office reported that for 2017 as a whole, the retail sales rose 1.9%, which is the weakness annual growth rate since 2013.
A spike in inflation above a 3.0% year over year rate coupled with sluggish pay growth drove real average household incomes lower in 2017, undermining both consumer confidence and spending power. Brexit concerns will remain a factor, however, with major issues coming into sharp focus this year ahead of the actual exit next March.
Germany waits for SPD vote on coalition talks
Germany waits for SPD vote on coalition talks. 600 delegates are expected to sign off party leader Schulz’s deal with Merkel designed to lay the ground for formal coalition talks between Merkel’s CDU/CSU alliance and the Social Democrats. After one failed attempt of a coalition with liberal FDP and Green Party this is Merkel’s last chance for a stable government and another stint in office without going through yet another election that is unlikely to bring a vastly different outcome.
This article was originally posted on FX Empire
