Yahoo Finance The EUR/USD Consolidates as the Range Tightens
The EUR/USD slipped lower sliding down to support near the 10-day moving average at 1.2345. The currency pair continue to chop around directionless. U.S. yields backed up today, despite a weaker than expected jobless claims report and soft Philly Fed Manufacturing.
Technicals
The EUR/USD is range bound and has been trading sideways for most of 2018. The exchange rate bounced from support and is sandwiched between resistance at a downward sloping trend line at 1.2415. Support level the 10-day moving average is seen near an upward sloping trend line that comes in near 1.2234. The fast stochastic generated a crossover sell signal in overbought territory which reflects accelerating negative momentum.
Eurozone current account surplus continues to trend higher
Eurozone current account surplus continues to trend higher. The surplus narrowed to 35.1 billion in February, from EUR 39.0 billion in the previous month, but unadjusted data show a surplus of EUR 405.5 billion in the 12 months to February this year, a further improvement from the EUR 373.7 billion in the 12 months to February last year. However, the goods surplus actually narrowed slightly in this comparison and the widening is mainly due to a sharp rise in the services balance to EUR 102.1 billion in the 12 months to February, compared to just EUR 37.8 billion in the 12 months to February 2017. The strong current account surplus is mainly due to Germany and has been repeatedly criticized as a sign that the government is not sufficiently promoting domestic investment and consumption.
U.S. Jobless Claims Declined
The 1k initial claims downtick to 232k in the BLS survey week extends last week’s 9k drop to 233k from the holiday-boosted 242k figure at the end of March. The trend in claims remains tight despite higher readings over the last three weeks that leave claims above the 45-year low of 217k at the end of February. The moving Easter holiday and school breaks often distort claims into early April, so the rise isn’t problematic with this year’s slightly early Easter holiday. Claims are averaging 333k thus far in April, following averages of 228k in March, a super-lean 224k in February, 232k in January, and 240k in December. The 232k April BLS survey week figure compares to recent readings of 227k in March, 218k in February, and 226k in January, and 242k in December.
Fed’s Dudley said the gradual rate path remains appropriate
Fed’s Dudley said the gradual rate path remains appropriate, and there’s no compelling case for aggressive action, in his speech on Important Choices for the Federal Reserve in the Years Ahead. He believes the labor market might have slacker, as suggested by Chairman Powell in his Monetary Policy testimony. Inflation remains under 2% he added. He does not want the Fed to overstay its welcome in terms of low rates, but suspects think there’s still some way before the Fed reaches neutral, where he sees the real neutral rate around 1%. He addressed the circumstances where it would be more appropriate for the Fed to move beyond neutral to a restrictive stance, and said it depends critically on how low the unemployment rate can go without pushing prices up over 2%. He noted a couple of long term issues for the Fed, including determining the appropriate long-term framework for policy. There he sees two options, one returning to the “corridor” system where reserves are scarce and the Open Market Desk adjusts reserves to maintain the target. Or, there’s a “floor” system where reserves are abundant and the Fed uses IOER to control the funds rate. Dudley prefers the floor system, as it doesn’t require forecasting the many variables that affect bank reserves.
UK retail sales in March disappointed
UK retail sales in March disappointed, contracting by a sharp 1.2% month over month. This was payback after the relatively strong 0.8% month over month expansion in the month prior, though was much worse than the -0.5% month over month median forecast had anticipated. The year over year figure worked out at +1.1%, down from +1.5% year over year in February and below the median forecast for 1.9% year over year growth. For the quarter, retail sales were down 0.5% quarter over quarter, which is the biggest quarterly contraction since Q1 2017. The ONS points to unusually harsh weather conditions as being a factor, and says that the poor performance of the sector will take toll on GDP.
This article was originally posted on FX Empire
