EUR/USD Daily Technical Analysis for November 23, 2017

David Becker

The EUR/USD gained traction following a softer than expected Durable goods orders report released by the U.S. Commerce Department. Jobs data showed that claims dropped which briefly boosted the greenback, but momentum in on the side of the Euro.  Coeure hinted that QE would end in September of 2018, when the current bond purchase program is scheduled to end.

Technicals

The EUR/USD moved higher poised to test resistance at a downward sloping trend line at 1.1840.  Support on the currency pair is seen near the 10-day moving average at 1.1738.  Momentum is positive as the MACD (moving average convergence divergence) histogram prints in the black with an upward sloping trajectory which points to a lower exchange rate.

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Coeure hints again at end to QE in September next year.

The ECB Executive Board Member told Germany’s Handelsblatt that it is “logical” to hope bond buying ends in September 2018, when the next follow up program comes to an end. So, a further confirmation that that there won’t be another QE extensions, even if the ECB remains reluctant to commit to an end date for net-asset purchases just yet. Coeure also stressed again that rates won’t rise until well after the end of net purchases and that the link between quantitative easing and inflation could be loosened before September, with the ECB gradual changing the guidance on policy by focusing more on rates, than QE.

The EU and UK are aiming to finalize a divorce deal in the week of December 4, in the lead up to the next EU leaders’ summit, according to the FT. This tallies with recent reports that PM May is set to propose a GBP 40 bln final divorce settlement, double her previously tabled offer and thought to be in the ball park of what the EU would find acceptable, though there remain obstacles to be cleared with regard to the Irish border issue (with the Republic of Ireland resolute that there can’t be a hard border). Nevertheless, signs of a possible breakthrough have been taken as a positive in forex markets, with the pound lifting versus the dollar and euro today. Sterling remains some 15% down in trade-weighted terms from levels prevailing ahead of the vote to leave the EU in June last year.

Claims Fell More than Expected

The 13k U.S. initial claims drop to 239k in the BLS survey week reversed the 13k rise to 252k in the week of Veteran’s Day, as claims fluctuate above the 44-year low of 223k in October’s BLS survey week. Claims have given back some of October’s post-hurricane tightness, though we expect tight claims through early 2018 with rebuilding and an improved economic backdrop, alongside holiday volatility that typical begins on Veteran’s Day and extends through January’s MLK weekend. Claims are averaging 244k in November, which is above the super-lean 233k October average but below the hurricane-boosted 269k average in September, versus similar prior averages of 246k in August, and 242k in July. The 239k BLS survey week reading exceeds the 223k October figure but falls short of the hurricane-lifted 260k BLS survey week reading in September. We saw prior BLS survey week readings of 232k in August and 234k in July. We expect a 260k November nonfarm payroll rise that assumes 40k in returning workers from hurricane and fire distortions.

Durable Goods Order Dropped

U.S. durable goods orders dropped 1.2% in October, weaker than forecast, after climbing 2.2% in September and 2.1% in August. Orders are up 2.5% year over year. Transportation orders dropped 4.3% following the 4.4% previous gain. Excluding transportation, orders increased 0.4% following September’s 1.1% increase. This component has not been negative since April. Nondefense capital goods orders excluding aircraft slid 0.5% versus a 2.1% gain previously. Shipments edged up 0.1% versus the prior 1.0% gain (revised from 0.9%). Nondefense capital goods shipments excluding aircraft were up 0.4% from 1.2%. Inventories rose 0.1% versus 0.6%. The inventory-shipment ratio was steady at 1.68 for a third straight month.

This article was originally posted on FX Empire

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