Yahoo Finance EUR/USD Daily Technical Analysis for February 6, 2018
The EUR/USD moved lower on Monday as the 10-year treasury yield increased by the its’ European counterpart. Sentiment in Europe fell back, while the PMI services in the Eurozone increase more than expected, and rose to an 11-year high. European retail sales declined, which was disappointing, while the Fed’s Williams said that rate hikes should continue.
Technicals
The EUR/USD edged lower finding support near the 10-day moving average at 1.2411. Resistance is seen near the January lows at 1.2537. Momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover buy signal. This occur as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line (the 9-day moving average of the MACD line).
Eurozone Sentiment Sell Back
Eurozone Sentix indicator fell back to 31.9 in February, from 32.9 in the previous month, with the current conditions indicator improving, but the expectations index falling back to 15.5 from 18.8. The German Ifo index also showed a marked drop in the expectation index and the Eurozone ESI declined, so doubts about the sustainability of the recovery are creeping in and indeed overall forecasts are already predicting a slowdown in overall growth going ahead.
Eurozone services, composite PMIs was unexpectedly revised higher
Eurozone services, composite PMIs was unexpectedly revised higher. The services PMI for January was revised up to 58.0 from 57.6 reported initially and versus 56.6 in December. This helped to lift the composite reading to 58.8 from 58.6 reported with the preliminary reading and up from 58.1 in December. Survey compiler Markit reported that output growth accelerated to a near 12-year high “underpinned by solid inflows of new business and accompanied by the strongest phase of job creation since late-2000”. Better than expected numbers that contrast with the slip in the European Commission’s ESI economic confidence that month. Bund yields nevertheless continue to head south, while the DAX is up from earlier lows, suggesting that sentiment is turning again, and that strong data are no longer just reduced to the impact on central bank policy.
Eurozone Retail Sales Declined
Eurozone retail sales declined -1.1% month over month in December, slightly more than consensus, but with November revised up to 2.0% month over month from 1.5% month over month reported initially. The correction in December left sales up a modest 0.3% quarter over quarter in Q4, down from 0.6% quarter over quarter in the third quarter. We don’t expect major revisions to Q4 GDP on the back of the numbers and with consumer confidence improving with labor markets are looking for an ongoing positive contribution from consumption to overall growth in the first quarter of the year.
UK January Services Missed Expectations
The UK’s January services PMI underwhelmed, with the headline of the survey falling to 53.0, the lowest reading since September 2016, from 54.2 in December. The median forecast had been for a fractional decline to 54.0. The details of the report were mixed. New business increased at a slightly faster pace than in December, but the overall rise in this component was slower than the average for 2017. Employment rose by a four-month high rate, and marked an 18-month period of continuous hiring in the sector. Optimism for growth over the next 12 months remain positive, with business confidence at its best since March last year. Selling prices rose as firms attempted to maintain profit markets in the face of rising price pressures, although while input costs increased, the rise was the smallest in percentage terms since January 2016. One salient feedback in the survey was that some firms reported that growth is being stymied by Brexit-related uncertainty.
Fed’s Williams said the Fed needs to continue hiking rates
Fed’s Williams said the Fed needs to continue hiking rates, in his speech on Expecting the Expected: Staying Calm When the Data Meet the Forecasts, and added that “this will keep the economy on an even footing and reduce the risk of us getting to a point where things could overheat.” However, though he’s boosted his growth forecasts due to numerous tailwinds, including strong financial conditions, better than expected global growth, and the tax cuts, he doesn’t believe the economy has “fundamentally shifter gear.” He sees neither an “economy going into overdrive or a bubble about to burst.” So in conclusion he said, “my message to those concerned about a knee-jerk reaction from the Fed is that, as always, we’ll keep our focus on the dual mandate and let the data guide our decisions.”
This article was originally posted on FX Empire
