EUR/USD Daily Technical Analysis for August 8, 2017
Stronger than expected payrolls data released in the U.S. on Friday buoy the dollar, which gave back a few its gains on Monday. An unexpected declined in German Industrial production kept a lid on the Euro. A move by the Trump administration toward tax incentives helped buoy the dollar and should keep interest rates buoyed. Inflation in Europe, as well as the United States, will be released on Friday, which will help traders determine if growth is spilling over into inflation expectations.
Technicals
The EUR/USD edged slightly higher on Monday, bouncing off support near the 10-day moving average at 1.1774. Resistance on the currency pair is seen near last week’s highs at 1.1910. Momentum on the currency pair has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This occurs as the spread (the 12-day moving average minus the e26-day moving average) crosses below the 9-day moving average of the spread. The index moved from positive to negative territory confirming the sells signal. The MACD histogram is printing in the red with a downward sloping trajectory which points to lower prices for the currency pair.
White House is Looking for Tax Repatriation.
White House Economic Advisor Cohn is talking up tax incentives to repatriate overseas corporate cash hoards and is reportedly resonating with dollar and equity bulls. He’s hoping to have a comprehensive tax plan by this fall. Cohn’s words are carrying extra weight as he is reputedly Trump’s top candidate to replace Janet Yellen as Fed Chairman if she’s not reappointed.
German Industrial Production Unexpected Declined
German industrial production unexpectedly dropped -1.1% month over month in June. After the much stronger than anticipated orders number last week the correction in production is disappointing, especially as it comes despite another relatively robust rise in energy production. Manufacturing and mining corrected -1.4% month over month in June, construction dropped for a second consecutive month. This is the first decline this year and while it ties in with a correction in German PMI readings, strong orders growth in the second quarter of the year still points to a recovery and ongoing robust growth ahead.
Inflation Released Friday
Inflation data will be released in both Europe and the U.S. Friday. While growth remains, strong and continues to broaden across countries, inflation remains relatively low, allowing the ECB to take a cautious stance on tapering while keeping monetary support in place into next year. Final July HICP rates from Germany, France, Spain and Italy which are all scheduled for Friday are expected to confirm preliminary data, which should leave national HICP rates ranging from 1.7% year over year in Spain, over 1.5% in Germany to just 0.8% year over year in France and the final Eurozone rate (due the following week) at 1.3% year over year. Those still remain clearly below the ECB’s upper limit for price stability, and there are no real signs that underlying domestic price pressures are building up decisively.
UK Housing Prices Growth Eased in July
UK house prices growth eased to a 2.1% year over year growth rate in the July Halifax index, the lowest annual reading since April 2013. Prices gained 0.4% in the month over month comparison, partially rebounding from a 0.9% month over month contraction in June which was revised slightly upward, from -1.0%. House prices contracted by 0.2% in the quarter over quarter comparison, which is a better gauge on the underlying direction of the market. This was the fourth consecutive quarterly decline, marking the longest run of declines since 2012. Stagnation in the market has come despite the rising employment and the lowest rate of unemployment since 1975, and chronic supply tightness that is characteristic of the UK property market. Declines in inflation-adjusted income, along with richly priced housing, which is near record highs in terms of price to disposable incomes and price to rent ratios, have exerting a downward tilt on house prices. The recent rise in political uncertainties, along with uncertainties about Brexit, are added negative factors in play.
Swiss CPI Data rose in July
Swiss July CPI came in at 0.3% year over year, up from 0.2% year over year in June and matching the median forecast. The recent weakening of the franc, which has decline by some 4% over the last two weeks, and is down by 8% since February lows, should invigorate long-absent price pressures in the Swiss economy, though it will take a few months to show in year over year inflation rates. Re-inflation will be welcome by Swiss policymakers, and the SNB won’t likely be in any particular rush to tighten monetary policy just yet.
This article was originally posted on FX Empire
