Yahoo Finance EUR/USD Daily Technical Analysis for February 5, 2018
The EUR/USD dropped on Friday following the stronger than expected U.S. jobs report. Wages were the focus for most trader’s, as they increased more than expected and for the second consecutive month. Yields jumped higher as the 10-year moved through the 2.8% level. European producer prices fell back, but continue to print above the 2% level. ECB members continue to call for the end of quantitative easing, which could add to the rise in yields.
Technicals
The EUR/USD moved lower generating and inside day, which is a lower high and a higher low which reflects indecision. Support is seen near the 10-day moving average at 1.2392. Resistance is seen near the January highs at 1.2537. Positive momentum is decelerating as the MACD (moving average convergence divergence) histogram prints in the red with a declining trajectory which points to consolidation. Prices are still forming a bull flag continuation pattern which is a pause that refreshes higher.
U.S. Jobs Data Was Stronger than Expected
U.S. nonfarm payrolls increased 200k in January, right on the button, after December’s 160k gain which was revised from 148k. However, November’s 252 jump was revised down to 216k. The unemployment rate was steady at 4.1%. Household employment surged 409k versus 104k previously, with the labor force up 518k from 64k. Earnings were up 0.3% last month following the 0.4% December gain which was revised from 0.3%. The workweek fell to 34.3 from 34.5. The labor force participation rate was unchanged at 62.7%. Private payrolls increased 196k, with the goods producing sector adding 57k. Construction jobs were up 36k. Manufacturing employment rose 15k. Service sector jobs rose 139k. Government employment was up 4k. This is an overall solid report, and the earnings data are likely to keep Treasury yields headed higher.
Italian Inflation Rose
Italian HICP inflation rose to 1.1% year over year in January, up from 1.0% year over year in previous month and against a Bloomberg consensus forecast of 0.8% year over year. The national CPI rate declined to 0.8% year over year from 0.9% year over year. The breakdown for the HICP rate showed sharply lower annual rates for transportation costs, which ties in with lower annual energy price inflation. Education costs also continue to show sharp declines over the year, but that number remains muddled by changes to university fees, a base effect that will fall out of the equation in the middle of next year. On the opposite end of the spectrum annual price increases for leisure and culture, as well as other goods and services moved higher. Mixed results, but even the higher HICP rate remains firmly below the ECB’s upper limit for price stability, as well as the Eurozone average, highlighting the central bank’s battle as inflation rates remain stubbornly low despite stronger growth.
Eurozone PPI Fell Back
Eurozone PPI inflation fell back to 2.2% year over year in December from 2.8% year over year in the previous month. Energy price inflation in particular decelerated – to just 0.1% month over month and 3.2% year over year, versus 2.3% year over year and 6.0% year over year in the previous month. However, excluding energy PPI inflation dropped to 2.1% year over year from 2.3% year over year as intermediate goods inflation and non-durable goods inflation declined.
ECB’s Nowotny calls for end of QE
The Austrian central bank head said in an interview with Oberoesterreichische Nachrichten that he doesn’t hide the fact that in his view the Eurozone is now in a condition where net asset purchases should be ended. He added that this would also bring a rise in long term yields going forward. The hawks had been quiet recently and even ECB executive board member Coeure urged caution as officials seemed to unite in efforts to try and keep the EUR down, but Nowotny’s comments will add fresh pressure on bonds.
January Construction PMI Missed Expectations
The UK’s January construction PMI came up short of expectations, with the headline tumbling 2 points to a four-month low of 50.2 in the headline reading, indicating only a fractional pace of expansion in the sector. The median forecast had been for modest decline to 52.0 from December’s 52.2 reading. A return to contraction in residential building activity was accompanied by near-stagnant commercial and civil engineering activity, according to Markit’s survey. New orders also declined, while cost pressures remained elevated. On a more positive note, confidence on future growth prospects increased.
This article was originally posted on FX Empire
