EUR/USD Daily Technical Analysis for September 28 2017

The dollar continued to gain traction on Wednesday as yields moved higher, paving the way for a lower currency pair. Despite a jump in Eurozone money supply and Italian economic confidence which helped buoy European yields. Softer than expected U.S. Pending Homes sales were offset by a stronger than expected U.S. durable goods orders, which weighed on the EUR/USD.

Technicals

The EUR/USD moved lower on Wednesday but rebounded from session lows following a weaker than expected U.S. pending home sales report. Support on the currency pair is seen near the August lows at 1.1661. Resistance on the EUR/USD is seen near the 10-day moving average at 1.1898. Momentum remains negative as the MACD (moving average convergence divergence) histogram prints in the red with a downward sloping trajectory which points to a lower exchange rate.

Italian Confidence Rises in September

Italian economic confidence jumps higher in September, with the overall reading rising to 108.0 from 107.1 and manufacturing, construction and retailing sentiment all improving markedly. Services sentiment remained steady over the month. The data means a further improvement in sentiment in Q3 compared to the second quarter, which keeps the Italian recovery on course for further expansion.

Eurozone Money Supply Rose in August

Eurozone money supply growth accelerated to 5.0% year over year in August, from 4.5% year over year in the previous month, more than anticipated. Loan growth picked up with loans to non-financial corporations rising 1.4% year over year, up from 1.2% year over year in July. The growth rate of loans to households accelerated to 3.1% year over year from 2.9% year over year, as loans for house purchases jumped 3.4% year over year, after rising 3.1% year over year in July. Consumer credit growth meanwhile remained steady at 6.7% year over year. Loans for house purchases saw a sharp rise over the month, which will add to concerns of bubbles in the housing market as the period of easy money continues.

UK CBI Distributive Sales Rose

The UK's CBI distributive sales survey beat expectations as the headline readings recover in September from had been a unexpectedly bad outcome in August. Realized sales came in with a balance of +42, well up on the median forecast for +8 and surging out of August's dismal -10 reading. 37% of respondents also expect sales to increase over the coming month, too. The grocery and clothing sectors drove the gains. The data is encouraging as the distributive sector has been challenged by the erosion being seen to real household incomes in the UK, and will keep the BoE on course to reverse the August 2016 rate cut at the November policy meeting, which would take the repo rate back to 0.5% from 0.25%.

The U.S. MBA Mortgage Market Dropped

U.S. MBA mortgage market index sank 0.5%, along with a 2.8% gain in the purchase index and a 3.5% decline in the refinancing index for the week ended September 22. The 7 basis point rebound in the average 30-year fixed mortgage rate to 4.11% no doubt contributed to the weakness on the refi side after the FOMC signaled that another rate hike this year and three more next year were in their sights.

U.S. Durable Goods Order Rose in August

US durable goods orders rose 1.7% in August, vs 1% increase expected. The headline Durable Goods Orders were boosted by a rise in civilian-aircrafts, offset in part by a pullback in military purchases. Excluding the transportation segment, durable-goods orders rose a modest 0.2% in August. Excluding defense goods, orders jumped 2.2% from July. New orders for nondefense capital goods excluding aircraft, which is a proxy for business investment, rose 0.9% in August after a 1.1% gain in July. The category was up 3.3% in the first eight months of 2017 compared with a year earlier. Motor-vehicle orders surged 1.5% gain in August, driven by many vehicles that were destroyed by Hurricane Harvey and Hurricane Irma. Nonresidential fixed investment proxy for business spending on equipment, structures and intellectual property products like software, rose at a 6.9% annual rate.

Pending Home Sales Declined

Pending home sales drop 2.6% in August, compared to expectations of a modest rise. That is the fifth drop in the past six months and below expectations. The main catalyst were the Hurricanes in Florida and Texas where closing dried up. Regionally, pending home sales in the Northeast fell 4.4% for the month and were 4.1% below a year ago. In the Midwest, the index decreased 1.5% for the month and was 3.2% lower than August 2016. Pending home sales in the South fell 3.5% for the month and were 1.7% below last August.

This article was originally posted on FX Empire