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KeyToMarketsUK

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Improve risk appetite, progress in US-China trade talks, Dovish FOMC minutes, BOC on hold and cut the forecast; market wrap
The US. Equity indices again advanced and stocks rallied, Dollar index (KTM: USDX) down nearly a percent and US 10 yr Treasuries were steady.

As expected Bank of Canada kept its benchmark interest rates at 1.75% as it did in Dec 2018, but bank cut the outlook on Wednesday. The bank mentioned the recent drop in oil prices has a material impact on the Canadian outlook. The bank also raised concerns on consumer spending and housing investment.
Projections: GDP will grow by 1.7% in 2019, 0.4% slower than the October outlook.
“CPI inflation is projected to edge further down and be below 2 percent through much of 2019, owing mainly to lower gasoline prices.”
Regarding future rate hikes, the bank said, “The appropriate pace of rate increases will depend on how the outlook evolves, with a particular focus on developments in oil markets, the Canadian housing market, and global trade policy.”

The first reaction on USDCAD was negative, but tested and held the support 100MA. The setting is still bearish, but the indicators are increasingly oversold.

FX:
Against the weaker USD, EUR,NOK, and NZD sit on top of the G10 list. Turning to commodities, Gold and Silver rallied by 0.60% each, but Brent oil rallied nearly 5.00%. In Agri commodities, Sugar prices (KTM symbol: Sugar_Raw) advanced further on the fourth straight session.


SUGAR_RAWDaily.png


In majors, EURUSD run through the first target, we set last week but GBPUSD still trading below the resistance 1.2815.

Key events to watch today
We will see China inflation data in the Asian session and ECB Dec 2018 meeting minutes at 12.30 GMT. On top of these, Powell speaks in Washington followed by FOMC members Bullard and Evans.

Chart of the day: EURCHF
The cross traced out a near-term bottom near 1.1185 in Sep 2018 -Jan 2019 via the formation of a double bottom pattern. While holding 1.1200/1.1185 watch out for 1.1275, 1.1310 and 1.1340 in an extension.
EURCHFDaily.png


The flip side, if close below the double bottom could retrace further towards 1.1100-1.1050. On medium-term perspective, dip buying between 1.1100-1.1000 using sl below 1.0900 its 161.8 fe (1.1500-1.1220-1.1350. Targets at 1.1200, 1.1350 and 1.1500.

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KeyToMarketsUK

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Dollar dullness continues; NZD and AUD were the leaders in G10, and Brent oil price loves to make its way; Weekly Wrap.
The dollar index (KTM: USDX) declined 0.50% in the second week of 2019 against most of the G10 counterparts. NZD rose 1.5% followed by AUD 1.20%. Besides Gold made modest gains 0.30% but traced out a near-term top via triple top formation.
Brent logs the second weekly gains and rose more than 20.0% from recent lows.
Data review:
  • ISM manufacturing PMI fell to 57.6, which is 3.1 percentage points lower than the November reading of 60.7 percent according to the ISM official data. This represents continued growth in the non-manufacturing sector, at a slower rate.
  • Australia trade balance was a surplus of $1,925m in November 2018, a decrease of $88m on the surplus in October 2018, according to ABS.
  • As expected Bank of Canada kept its benchmark interest rates at 1.75% as it did in Dec 2018, but bank cut the outlook on Wednesday. The bank mentioned the recent drop in oil prices has a material impact on the Canadian outlook.
    Projections: GDP will grow by 1.7% in 2019, 0.4% slower than the October outlook.
  • In the Fed minutes of the latest FOMC meeting, committee admits that “Investors’ perceptions of downside risks to the domestic and global outlook appeared to increase over the intermeeting period, reportedly driven in part by signs of slowing in foreign economies and growing concerns over escalating trade frictions.”. We read the minutes dovish, dollar declines.
  • China official CPI readings fell in December, according to the government data.
    China’s December CPI was 1.9% YoY, the lowest in six months, forecast 2.1%vs 2.2%.
    December PPI was 0.9% YoY, the lowest since September 2016, forecast 1.6%, vs. 207%
  • The minutes of the latest ECB meeting highlighted that “Incoming data on growth had been weaker than expected, reflecting softer external demand.”
  • November Australia retail sales rose 0.4% in November 2018. This follows a rise of 0.3% in October 2018, and an increase of 0.2% in September 2018, ABS reported.
  • UK GDP grew by 0.2% in November 2018, following flat growth in September 2018 and growth of 0.1% in October 2018. GDP grew by 0.3% in the three months to November 2018.
    GBPUSD experienced a bullish breakout through the range 1.2700-1.2815. Traders focus turned towards a vote on Tuesday. UK Parliament will vote on PM May’s Brexit deal; we will experience high volatility (3-5%) on GBP assets in this week (Jan14-18).
  • As widely expected the CPI declined 0.1% in December, the U.S. Bureau of Labor Statistics reported.
FX landscape:
USDX managed to hold the 200MA/100ma (Weekly)

EURUSD run through the target, we set last week, and the price paused at 200EA.

GBPUSD: The cable experienced a bullish breakout through the range 1.2700-1.2815. We will experience high volatility (3-5%) on GBP assets in this week (Jan14-18).

AUDUSD: Settles far above 20MA (Weekly) for the first time since March 2018. Further dollar weakness could boost the Aussie dollar to 0.7315 and even 0.7400 levels in the near term. Buying the dip favors the trend.

NZDUSD: Support has raised to 0.6775 from 0.6625. This week’s range is 0.7000-0.6690.

Brent oil rallied more than 23.00% from recent lows, but still in the given resistance zone. The daily indicators are remaining bullish; dip buying offers better risk reward. Bloomberg reported, “Oil extended its winning streak to the longest in almost a decade.”


BRENTDaily.png

Turning to precious metals, Gold and Silver traced out a near-term top via triple top pattern formation at 1298.50$ and 15.80-15.90$ respectively. A move above the triple top could push to the next resistance zone 1307.00$ -1310.00$.

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KeyToMarketsUK

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KTM FX Weekly: EURUSD implied volatility to pick up

Since mid-Nov 2018 the pair has been consolidating between 1.1300-1.1500, finally produced a bullish breakout last week on account of the weak dollar and Fed’s clear signal of a pause in its rate cycle. However, the price action failed to stay above the breakout.

Ahead of the Brexit vote today and the first ECB meeting of the year (23rd Jan)) we expect the pair to trade between new range 1.1820-1.1300.

Regarding the economy, we learned from the recent PMI data underpin the downside risk. Last week‘s ECB minutes acknowledge the weaker data “Incoming data on growth had been weaker than expected, reflecting softer external demand.”

Also, economic data rereleased on Monday confirmed that Europe anchored to the downside risk.
“We now have conclusive proof that Europe is in an economic slump, and that two of its biggest economies are careering towards recession” Business Insider reported.

Now markets pay attention to the upcoming PMI surveys (due next week) and ECB meeting on 23 Jan. We expect no material changes to the communication and forward guidance. Back in December 2018 meeting, the central bank remained comfortable with the growth outlook.

We also expect the ECB’s first rate hike signal after this summer is the key driver for EURUSD.

Data review: Poor EZ data
The industrial production data released for EA down by 1.7% in November, according to the estimates from Eurostat. On YoY, the industrial production fell by 3.3% in the EA. Last week Germany industrial production data was even worse than expected, a drop of 1.9% recorded.

IP.JPG

Source:Eurostat

Technically, weak IP data for Germany and EA provided nothing new moves to either bulls or bears.
Data preview: This week we don’t have any top-tier data for EUR.

In the EA, CPI for Germany and EA are due out. Also, ECB President Draghi due to speak on the ECB’s 2017 Annual Report before the European Parliament. Besides, in the US, we have PPI along with three Fed speakers George, Quarles, and Williams.
Apart from the EA data, this week’s EURUSD price action cast on Brexit vote probably. The Guardian reported the EU is prepared to extend Article 50 until July, or perhaps even longer.

Morgan Stanley said in a note “We expect EURUSD implied volatility to pick up if the UK’s uncertain events pass.”

Natixis Bank reported “Uncertainties over Brexit and concerns over the rise of populist parties within the European Parliament following the May elections will continue to weigh on European assets, more particularly the banking sector. In such an environment, the market will increasingly price in a protracted monetary status quo on the part of the European Central Bank, which in turn is likely to weigh on the euro”.

TECHNICAL OVERVIEW
EURUSD price strengthened since early Jan low as protracted buying triggered and a break of resistance at 1.1500, confirmed upside sentiment.

The trading range is elevated from 1.1200-1.1500 to 1.1300-1.1820. Last Thursday the price ran through the target, we set before and after the new year. It halted the gains against 200EA. The 161.8 fe of A-B-C structure is pointing to 1.1640.
Now the price trade back to virtually unchanged levels, with US dollar rebounds marginally at 200MA. We expect this week’s range could be between 1.1640-1.1300.

The bearish turnaround of the oscillator should cap the rallies in the coming days.

Readers can remind that we forecast EURSUD appreciation in the end of 2018 and in the first week of this year targeting 1.1560 and 1.1590. We continue to forecast EURUSD to head higher in the coming weeks. So, we look for another opportunity to return to enter long, probably for 1.1800-1.2000.

Supports located at 1.1420/1.1400, 1.1330 and 1.1270.

EURUSDDaily.png

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KeyToMarketsUK

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The pound recovered post-May’s Brexit defeat as the outcome is widely expected and the rally continued on Wednesday led by the latest development of Brexit. May’s government won the vote of confidence.

Following the result announcement (Tue), the pound rallied against the most traded currencies; cable manages to hold the support zone 1.2700-1.2660 mid-August 2018 low and surged to the second resistance at 1.2900 its 100MA. Even though the cable broke the 100MA thrice, the price action failed to close above. It seems the cable find buyers between 1.2700-1.2600. Against the recent backdrop, the cable is seen to recover to 1.2900 ahead of the resistance at 1.2930 Friday high.

Note that only a break of last week’s high would lessen the risk of a dip back to a significant support finds zone finds between 1.2830-1.2815 (Past three days low-Dec 31 high), paving the way for a lasting recovery to 1.3000, 1.3090 its 200MA and 1.3175 Dec 07 top coincides with 100MA (Weekly) and 20MA (Monthly).

GBPUSDDaily.png

Technical stories:
GBPCAD, GBPJPY and GBPNZD-Pauses at key resistance level………..Read in KTM blog

What next?
Now the market is the focus “Plan B” which the government must submit not later than Jan 21.

  • Morten Lund analyst at Nordea said, “Theresa May will deliver a plan which involves seeking further concessions from the EU – possibly combined with a request to extend the 29 March deadline”.
  • In the short-term the pound trading range still in a difficult situation. Based on the following Brexit timeline, the volatility, and uncertainty going to steer the pound.
    Morgan Stanley analysts come out with an exhibit (below image). The analyst team expects a greater clarity by early Fed. “We expect greater clarity by early February before parliament runs out of time to hold elections before Brexit, assuming that the EU will only agree to a delay once the UK has made a decision on the way forward.”.
BRexit.JPG


  • Adrian Paul, analyst at Goldman Sachs said in a note “We think the prospect of a disorderly “no deal” Brexit has faded further. That sharper skew implies a greater probability of an extension to the 29 March Brexit deadline embedded in Article 50.”.
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KeyToMarketsUK

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  • The GBP is the most energetic performer, so far
  • Palladium at a 26-year high hit 1400$
  • It is again a headline-light Asia session
US dollar has managed to climb higher against most of the G10 currencies on Thursday except Pound and Aussie dollar. US 10Yr TY up 2bps t0 2.75.

The pound rallied this week on developments on Brexit:
The pound has outperformed again overnight, rose more than a percent against most-traded currencies. So far, GBP outperformed more than 2.00% against G10 currencies, especially against CHF and USD rallied nearly 3.00% on the latest developments on Brexit as a greater probability of an extension to the 29 March Brexit deadline. Readers can remind that we have been recommending buying pound against EUR, JPY and USD.

Read GBP trades in our KTM Blog

Besides EURUSD and NZDUSD underperformed 1.00% and 0.20% respectively, so far this week.

On the data front, the euro area annual inflation rate was 1.6% in December 2018, down from 1.9% in November according to Eurostat estimates. Looking at the most recent set of data eurozone growth anchored to the downside risk.

Market traders are waiting for data clues, PMI surveys, German ZEW Economic Sentiment and German Ifo Business due next week. On top of these, ECB meeting due 23 Jan. We expect no material changes to the communication and forward guidance. Back in December 2018 meeting, the central bank remained comfortable with the growth outlook.
We also expect the ECB’s first rate hike signal after this summer is the key driver for EURUSD.

In commodities, Palladium hit 1400$, currently trading at a 26-year high.

A day ahead: It is again a headline-light Asia session.
Once again it will be quiet in terms of market-moving data releases, and that will leave investors’ primary focus on UK Retails sales and Canada CPI.


Chart of the day: AUDUSD, upside forecast
Despite the recent backdrop the cross manages to hold the 14MA which coincides with Jan 10 low. For trading perspective (1 day) trading resistance seems to be at 0.7235. Note that a break above could outperform to 0.7300 and even 0.7400 levels in the coming days. A daily close above 0.7250 could strengthen the 0.7400 forecast.

Supports are located at 0.7145 below here would underpin bearish momentum again, paying the way for a decline to 0.7100.

Turning to daily indicators, they are signaling a breakout is imminent. However, note that AUDSUD largely cast on US-China trade developments. Furthermore, China GDP, Retail sales and IP due next week.
AUDUSDDaily.png

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KeyToMarketsUK

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FX market this week: Central Bank monetary policy meetings (BOJ and ECB) among top-tier data/events to keep forex traders busy.
Central bank meetings are likely to be the big focus point for the forex traders in this week (Jan21-25) along with other top-tier macro data points across the globe. On top of these, headlines on US-China trade talks and latest developments of Brexit are likely to keep investors busy.

Overall, this week is expected full of action with the G10 currencies, few of them namely AUD, EUR, GBP, JPY, and NZD. Near-term volatility woes will be dictated by the upcoming BOJ and ECB meetings with USDJPY and EUJPY are in the spotlight.
In Asia, this morning China’s Q4 GDP due, JPY crosses, USDCNH and Aussie dollar are in focus. Turning to Europe, it will be a light headlight session, besides US banks will be closed in observance of Martin Luther King Day.
  • “China is expected to report on Monday that economic growth cooled to its slowest in 28 years in 2018 amid weakening domestic demand and bruising U.S. tariffs” Reuters reported.
For the week (Jan 14-18) dollar dominated against the G10 counterparts with the US, 10Yr Yields closed at 2.79, the highest level in a month.

The following are the top-tier data releases and events that will keep forex traders busy:

China Q4 GDP (Mon) and IP, UK unemployment rate (Tue), German ZEW Economic Sentiment (Tue), NZ Q4 CPI (Tue), BOJ policy meeting (Wed), Canada Retail sales (Wed), Australia labor force data (Thu), EA PMI surveys (Thu), ECB policy meeting (Thu) and German Ifo Business climate (Fri).

Bank of Japan and European Central Bank meetings:
This week USDJPY and EURJPY will react to the upcoming Central Bank’s policy meeting in a broader range than usual, especially EURJPY. We expect both the banks keep the interest rates steady, but Draghi’s comments may tune dovish in the January’s meeting. Given the recent weak economic data releases, we expect Draghi will highlight the downside risk to the EA economy.
  • Nomura Research note highlighted that “the most important discussion this month relates to the TLTROs.”
    In a research note, analysts said, “We expect some indication from President Draghi that another round of TLTROs could be announced ahead of the Net Stable Funding Ratio (NSFR) regulations, which become effective from June 2019.”.
  • In contrast, Danske Bank analysts said: “After the ECB decided to end net asset purchases in December 2018, new policy signals are not warranted at next week’s meeting in our view.”.
Chart of the week: EURJPY

EURJPY must hold 123.40 to witness further up move and further bullish bias available above 125.00 for 126.60 and 127.00.
Trade: As long as 123.40 looks for the breakout with an immediate target of 126.60 and 127.00.
The flip side, it fails to hold then we could retrace back to 122.60 and 121.30.
EURJPYDaily.png

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KeyToMarketsUK

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  • Continued upward journey
  • Momentum appears to have stalled at 100MA(Weekly)
  • Technical rebound in a bearish trend
Brent crude oil rise at the start of the week at two- month high and settled above 50MA comfortably for the first time since Oct 2018. The daily RSI is parked below the equilibrium line to 50 points.

It has continued to rally last week too, with breaking the Jan 11 high 62.50$ but facing resistance at 100MA (Weekly). Last week the price showed great respect to 23.6 fib reaction and rallied further. The way the price rebounded with higher low pattern and tiny consolidation, shows the bulls have taken the control in the near-term. It will be interesting to see if we make a clean break of $64 this or next week.

Is up for a fifth straight session and fourth straight week. What next?

The price is up for a fifth straight session and a fourth consecutive week. The run last extended to four weeks (Sep 2018) and six consecutive weeks in April and May 2018. Despite the recent rally, the RSI indicator shows that Brent oil has not entered the overbought category.

The level 63.75$-64.00$its 38.2 fib reaction is in focus for me. Any break and hold above would have me looking to the 66.00$, 68.50$ and 70.00$.

According to the latest IEA’s Oil Market Report, “the journey to a balanced market will take time, and is more likely to be a marathon than a sprint. ” The report also highlighted “there are signs that market re-balancing will be gradual.”

BRENTDaily.png

Forecast: The week ahead we are going to trade in the new range 59.00-64.00$ up from 57.80$-64.00$.

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KeyToMarketsUK

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  • Gold likely to remain rangebound till support of 1276.70$ holds
  • Gold is likely to trade in a tight range due to global growth concerns.
The yellow metal traced out a near-term top near 1298-1297$ in early Jan 2019 via the formation of a double top pattern. While the resulting downtrend stalled on Tuesday, the ensuing corrective phase has just come to an end as prices pierced at a parallel support level at 1276.70$, developed a double bottom.

Selling pressure remains very strong; a descending triangle is still evident in the four-hour chart. On top of this, the daily indicators are extremely bearish, hence near-term setting is negative. Under these conditions, a recovery above Jan high still seems difficult.

At the time of preparing this, the price is trading at 1285.50$ tad below the first resistance 1287.50$. Support just has been elevated from 1279$ to 1283$.

XAUUSDH4.png


Caution will be ordered if the price does not rebound above the first resistance 1287.50$, this would pound a new downward wave (lower high) towards 1281$ and the double bottom at 1276.70$. A break below this accelerate the downward wave possibly towards 1270$ and 1264$ initially.

Three-day view: The next crucial resistance level to watch out is 1300$ on the upside while supports are located at 1280$ and 1276.70$.

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KeyToMarketsUK

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  • Taking profit on our long GBP/XXX trades
  • Focus on EURJPY and USDJPY
The pound extends the rally this week as well on continued dollar weakness and latest developments of Brexit. The pound rose between 1.50-2.30% against the most traded currencies, led by GBPCAD with 2.30%. On a monthly basis, GBPCHF, EURGBP, and GBPUSD rose 3.30% each while GBPJPY rose only 2.00%.

During the recent GBP rally EURGBP, GBPJPY, GBPAUD, GBPCAD, and GBPNZD ran through the targets we set last week. The cable recorded the most robust rally on a monthly basis, so far since Jan 2018. Moreover, the cable has been moving higher for six consecutive weeks. Back in August 2018 and December 2017 the run lasted for the same six weeks, but in August 2012 the run lasted for seven weeks.

Based on these facts, we expect the GBP appreciation theme is going to stop by tomorrow or probably in the next week. However, the chances are remote.

On Wednesday GBP and JPY sits atop the G10 FX table. This comes after the Yen underperformed Wednesday, but USDJPY and EURJPY fail to break through the key resistance levels. But USDJPY support raised to 109.00/109./15 from 107.75.

USDJPYH4.png

Gold lost 2$ overnight, failed to handle the parallel resistance (R1) in Asia-Pacific session and fell back to the support as the day progress. As we forecast on Wednesday (Tokyo session), the price failed at the resistance level. The trend remains in a tight range between 1276-1287$.

Brent crude oil lost nearly 3$ so far this week after rallied three consecutive weeks. The level 63.75$-64.00$its 38.2 fib reaction is in focus for me. Any break and hold above would have me looking to the 66.00$, 68.50$ and 70.00$.
Today’s pivotal finds around 60$ below here, focus shifts to 59.50$/59.00$ and 58.50% its 20MA. The daily oscillator has turned bearish.

Read weekly Brent forecast in KTM blog

In Asia this morning, the focus remains on Aussie December labor force data. Turning to Europe, we will see PMI surveys and ECB January policy meeting.


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KeyToMarketsUK

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  • ECB has now confirmed the downside risk in the EA, a dovish turn
  • Thursday’s PMI highlights further woes
EUR crosses running to an area of support zone, break down would trigger a downgrade. The immediate support for Gold is 1276$. If this break, then there could be a 20$ fall.

After the ECB’s Draghi comments, EURUSD fell sharply but held the support zone. EURGBP was the biggest loser down over 1.50%, followed by EURUSD with 0.80% in this week, so far. The immediate crucial support zone could be found at 1.1300-1.1260, if it breaks focus shifts to November 2018 low at 1.1215.
Ahead of today’s macroeconomic data German Ifo Business Climate, we trade between 1.1260-1.1335. Overall, the price action has struck in a narrow range of 1.1400-1.1260 and requires a significant range breakout through 1.1425 for the next leg of the rally.

EURUSDDaily.png


Today in Asia session, the price hit a session low of 1.1300. The daily RSI is parked below the 50 equilibrium but the oscillator is extremely bearish, hence setting is mixed.

• For bulls, as long as 1.1215 is supporting (Friday closing basis) look for 1.1350 and 1.1400 initially.
• For bears, close below 1.1215 means 1.1100 and 1.1000 is coming.

Here are the Key support and resistance for EUR crosses:

EUR.jpg


EURJPYH4.png

EURGBPWeekly.png

EURCHFDaily.png

EURNZDDaily.png


Turning to Gold, the immediate key support could be at 1276$; if the price breaks that level, we could expect a sharp fall in the coming days. According to the below chart, intraday pivotal finds at 1279$ followed by 1276$ triple bottom. On the upside key resistance levels are placed at 1283$ and followed by 1287$ Wednesday high.

XAUUSDH4.png


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KeyToMarketsUK

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After a decent rally in early January, EURUSD shifted to a prolonged period of consolidation. So far this month, EURUSD remains neutral, but euro crosses beaten down more than 3.00%. The pound and loonie have performed strongly with 3.00% gains, followed by AUD and NZD with 2.00% against the euro. Whereas EURCHF is the superhero with a percent gain.

Economic data from euro area last week printed weaker than expected supported the ECB’s growth concerns. The latest Manufacturing and Service PMI surveys confirmed that the euro area economy edged to stagnation at the start of 2019,
according to IHS Markit.

ECB has now confirmed the downside risk in the EA, a dovish turn. Draghi confirmed that “The risks surrounding the euro area growth outlook have moved to the downside” and also highlighted that “The incoming information has continued to be weaker than expected.”

Data review: January EA PMI surveys retreated
  • December Germany PPI decreased by 0.4% vs. +0.1% in Nov 2018, according to Destatis.
  • The ZEW Indicator of Economic Sentiment for Germany increased slightly in January. According to the official data, the economic expectations are recorded an increase of 2.5 points to -15.00 recorded an increase of 2.5 points in January 2019, and now stands at minus 15.0 points vs. -17.5 in November, well below the long-term average of 22.4.
Having dropped to 17.5 in November, the Germany ZEW Indicator of Economic Sentiment for Germany increased slightly in January. In our view, the Germany ZEW Indicator will rebound in the coming months, probably in 2H 2019 but set to remain well below the long-term average for some more time.
ZEW President Professor Achim Wambach commented that “It is remarkable that the ZEW Economic Sentiment for Germany has not deteriorated further.”
  • Germany January PMI reading fell below 50.0 to 49.9, 50-month low vs. 51.5 in December whereas Services PMI increased to 53.1, 2-month high vs. 51.8 in December, according to IHS Markit.
  • Turning to EA, January Manufacturing PMI fell to 50.5, 50-month low vs. 51.4 in December and Services PMI fell to 50.8, 65-month low vs. 51.2 in December.
  • Ifo Business Climate Index fell from 101.0 points in December to 99.1 points in January, dropping to its lowest level since February 2016, according to the CES.
Data preview: Market is closely watching the FOMC January meeting and U.S January job market data.
Even an element of surprise could fail to move the ball beyond the given range 1.1570-1.1270. On top of the top-tier data releases market players also watching the US-China trade talks developments. Vice President Liu Hu will visit the U.S on Jan 30.

It is widely expected that the FOMC likely to keep policy on hold in Wednesday’s meeting and the also expect the first press conference of 2019 could wrap up with a lack of surprise.
Senior economist Bill Diviney at ABN AMRO said: “We think the 2019 set of voting members will have a more dovish tilt than that of 2018”.

TECHNICAL OVERVIEW

In our view, ahead of the action pack week the trend in EURUSD looks titled settled within the 1.1570-1.1270 range. The price action is facing stiff resistance against the 100MAs, and the technical picture remains mixed.

As we forecasted on Friday, EURUSD rebounded to the target levels. We favor now to face stiff resistance against the 100MAs seems between 1.1445-1.1455. A break of these would give an impulse move higher to the next resistance 1.1500, paving the way for a more pronounced rally to the 200MAs seems between 1.1550-1.1570.

The flip side supports located at 1.1390, 1.1330 and 1.1290.


EURUSDDaily.png


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KeyToMarketsUK

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Today’s data highlight is Australia Q4 CPI in the Asian session, but it is not a catalyst for AUDUSD.. Another round of US-China trade talks and FOMC meeting are the key drivers.
  • Westpac Economics are forecasting headline CPI at 0.3% for the quarter, which would see the annual pace ease to 1.5% from 1.9% (mkt. 0.4%, 1.7%).
It is widely expected that the FOMC likely to keep policy on hold in Wednesday’s meeting and the also expect the first press conference of 2019 could wrap up with a lack of surprise.
  • Senior economist Bill Diviney at ABN AMRO said: “We think the 2019 set of voting members will have a more dovish tilt than that of 2018”.
Ahead of today’s data and event risk, I discuss technical overview for AUDUSD, AUDJPY, and USDJPY in this article.
As traders remained cautious ahead of the data and event risk the Australian dollar weakened 0.2% against most-traded currencies, while against GBP decreased 0.6% against AUD on Brexit woes.

For AUDUSD, the hourly chart structure shows that AUDUSD likely to remain between 0.7140-0.7175 before the Q4 CPI release. As per the higher time frame (H4/Daily) the price action caught between 0.7235-0.7070. On the higher side, 0.7200-0.7235 shall be the key area where one can look at, sustained trade above 0.7235 Jan 11 high will resume the upmove taking the cross higher towards 200MAs placed at 0.7295 and 0.7330 prior swing low.

Flip side a close below the critical support level 0.7075 will push prices lower towards 0.7020/0.7000.

On a monthly basis, among AUD/crosses AUDCAD outperformed with 2.50% followed by AUDUSD and EURAUD with 1.5% each while AUDCAD fell 1.30%.

AUDUSDH4.png


The AUDJPY closed at 78.20 on Tuesday. According to the daily chart, the critical support level is placed at 77.90, followed by 77.50. If the cross starts the northward journey, key resistance levels to watch out are 78.60 and 79.10 Jan 18 high. Sustained trade above 79.10 will resume the upmove taking the cross higher towards 50MA placed at 79.60 and 80.20 its 20MA (Weekly).

Flip side a close below the key support level 70.50 will push prices lower towards 77.00 and 76.60 levels.

AUDJPYDaily.png


USDJPY trade back at virtually unchanged levels, with dollar index (KTM: USDX) modestly lower On Tuesday. The price halted after rising to 110.00 and failed to gain a footing above the double top pattern at 110.00. The daily indicators give a mixed outlook with oscillator negative crossover and RSI lacks conviction. Support at the 109.00has held firmly in recent days keeping the momentum in a narrow range between 109.00-110.00. To confirm a change in trend, the price needs to erase the double to pattern at 110.00. In this case, 110.80 and 111.30 are the next destinations in the near term.

On the downside, a break below the 20MA sits at 109.00 may trigger loses towards 108.60, 108.00 and 107.60.

USDJPYDaily.png


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KeyToMarketsUK

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Fed on hold and shifted gear to patience mode; G10 currencies loves to make the way higher against the USD; Gold at eight months high; Ripple rallied 12%; Market wrap.

As everyone expected the Committee decided to maintain the target range for the federal funds rate at 2-1/4 to 2-1/2 percent and expressed the word “patience” which is dovish.

“The Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes.”

Fed on hold but not dollar, it took a toll on this dovish word “patience”and sold heavily against the G10 counterparts. AUD and NZD lead among G10 block with a percent gain.

USDXDaily.png


At one stage the AUD rose 1.50% posted a high at 0.7270, two-month high and ran through the target we set on Wednesday. Better than expected Q4 CPI reading and dovish Fed statement makes Aussie dollar “hot” overnight. Besides soaring, iron ore price in China is an additional bullish factor to AUD.

The antipodeans surprise the traders by forming a higher top & high bottom for the first time since Jan 2018 and April 2018 respectively.

The further return of USD weakness allows EM currencies to perform better. Turkish Lira and South African Rand rose nearly 2.0%.

Mexican Peso weakened against the USD on the weak Q4 GDP. The cross USDMXN spotted with a double bottom pattern and consolidating in a rectangle. Moreover, the daily indicators are incredibly bullish. Sustained trade above 19.30 will resume the up move taking the cross higher towards 19.45 and 19.60 in the near term.


USDMXNDaily.png


In majors, EURSUD and GBPUSD continued to consolidate in tight ranges. 1.1500 and 1.3220 are the key resistance levels to watch out in Thursday’s session.

Turning to commodities, Gold was the first who push the price higher out of the range followed by AUD in FX. The weak dollar pushes the yellow metal to eight-month higher, but pauses at 80.0% fib reaction. The immediate, meaningful resistance seems between 1323.50-1326.00$ above these could push further higher to 1350$, 1365$ and 1375$ July 2016 high.
Supports located at 1315$ and 1308$.

Interestingly the price action from 1300$-1323$ has been driven on a negative RSI divergence.


XAUUSDDaily.png


Turning to Cryptocurrencies, Ripple rose more than 12% and spotted with a double bottom formation. The daily indicators are bullish.

XRPUSDDaily.png


At higher time frame, the price has solid support finds between 0.2430 and 0.1920.

XRPUSDWeekly.png

However, forex and Commodity markets are expected to remain highly volatile ahead of tomorrow’s January NFP data. Among G10, we are watching USDJPY closely as US-China trade talks started and technically holds the pivotal 108.65, so far.

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KeyToMarketsUK

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Interesting trendline capping the rallies:

Selling pressure remains very strong, an interesting trendline (descending) is still in evidence in the daily chart.

USDJPY price is steady on Asia session today, having earlier rejected at 20MA. The four-hour chart setting is negative. The price action was peaked ahead of the extreme dovish Fed meeting. The weak daily RSI and the bearish turnaround of the daily RVI should cap the rallied in the coming days. Against this backdrop, a lasting break of the 109.20 and 109.70 key barriers sounds tricky, and we rather fear a decline to support at 108.40, 108.00/107.70 levels.

Note that a break below 107.70 would underpin bearish momentum, paving the way for a decline to 107.20/107.00.

USDJPYDaily.png


The neckline capping the rallies:

Before retraced to 108.50 on Jan 31st, the price traced out a near-term top near 109.90-110.00 in mid-Jan 2019 via the formation of a double top pattern.

USDJPYH4.png


For bulls, only a sustained trade above 110.00 would ease downside pressure. In this case, the price could rally towards 111.00 and 111.25.

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KeyToMarketsUK

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FX market this week: Central Bank monetary policy meetings (RBA and BOE) among top-tier data/events to keep forex traders busy.
Again Central bank meetings are likely to be the big focus point for the forex traders in this week (Feb 04-08) along with other top-tier macro data points across the globe. On top of these, headlines on US-China trade talks and latest developments of Brexit are likely to keep investors busy.

Overall, this week is expected full of action with the G10 currencies, few of them namely AUD, GBP, and NZD. Near-term volatility woes will be dictated by the headlines of US-China trade talks and RBA outlook with USDJPY and AUDUSD are in the spotlight.

In Asia, this morning Australia Building Approvals, Dec 2018 due, not a market mover. Turning to Europe and U.S, it will be light headlight sessions and traders waiting for RBA policy meeting and Retail sales and Trade data (Tue).

In January 2019, the U.S Dollar liberated against the G10 counterparts with the US, 10Yr Yields closed at 2.63, the lowest level in
a month. The Australian dollar and the pound lead with 3.50% each and followed by Kiwi, Loonie and Norwegian Krone with 3.00% each.


The following are the top-tier data releases and events that will keep forex traders busy:
  • Mon: Building Approvals, Australia, December 2018, EA PPI and Italy Prelim CPI
  • Tue: International Trade in Goods and Services, Australia, December 2018, Retail Trade, Australia, December 2018, RBA monetary policy meeting, EA Services PMI survey, ISM Non-manufacturing PMI.
  • Wed: Speech by Philip Lowe, Governor, Sydney, Germany Factory orders, US Trade Balance and NZ Q4 labor market statistics.
  • Mega Thu: Fed Chairman Powell due to speak in Washington DC, EU Economic forecast and BOE monetary policy summary.
  • Fri: RBA Statement on Monetary Policy< Fed member Bullard speaks, German Trade balance, Italy IP and Canada jobs data.
Reserve Bank of Australia and Bank of England meetings:
This week AUDUSD, GBPAUD, and GBPUSD will react to the upcoming Central bank meeting, especially GBPAUD. We expect both the banks keep the interest rates steady. Given the recent Central Banks dovish turn the Fed and ECB, we focus more on RBA’s language.

The Reserve Bank of Australia monetary policy meeting due on Feb 05, 2.00pm (AEST). It will be an uneventful as the market participants expect to keep the policy setting s steady. Recently printed Q4 CPI data beat analysts expectations for the first time in the past two years, which is to a surprise the market. The data rose 0.5% compared to 0.4% in Q3. On an annual basis, rose 1.8% vs. 1.9% Q3.

Turning to the Bank of England monetary policy meeting we expect the bank to keep rates steady. Ahead of the Brexit deadline we expect the MPC is in no rush to hike the rates until clouds cleared over Brexit outcome.
The bank is likely to wait until a transition period is secured before moving again. This makes May the most likely date for a next rate hike, according to Moody’s Analytics.

Chart of the week: GBPAUD

The cross has been consolidating in a tight range between 1.8510-1.7610. Ahead of the RBA and BOE monetary policy meetings, we expect the price action unlikely to change the range in the near term, but at the higher time frame, the downside prevails as long as 1.1825 is resistance (weekly basis).

GBPAUDWeekly.png


For a trading purpose, a move above 1.8110 needed to rally further towards 1.8190/1.8220 and 1.8290. Furthermore, a daily close above 1.8300 could offer further upside towards 1.8440 and 1.8500.
For bears, a downside break below 1.7850 could pave all the way to 1.7750 and 1.7620 initially and followed by 1.7500.
GBPAUDDaily.png


It is important to always keep in mind the risks involved in trading with leveraged instruments.

What is your Technical View?
Do you have a different idea? Please leave us a comment and get an answer from our professional analysts