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The Sterling fell sharply against the US Dollar, after the report by Markit on the UK services industry. The GBP/USD exchange rate decreased 24 base points or 0.17% to the 1.4123 mark and continued to decline.

Britain's economy revealed notably slower growth in January with the recent survey casting doubts on stronger investors' expectations that the Bank of England was about to raise rates in the following months. IHS Markit released its survey showing that the UK economic growth is likely to slow to 0.3% in the Q1, after a 0.5% gain in the last quarter of 2017. The weakening was mostly triggered by the country's dominants services industry, where activity growth decreased to the lowest level in 16 months of 53.0 in January.

The EUR/USD currency pair was not exposed strongly to the influence of fundamentals on Monday. The Greenback weakened against the European single currency 7 base points to near the 1.2400 level.

Economic activity in the US services sector was the strongest in more than 12 years, supported by rising new orders, suggesting that the economy sustained the strong momentum in the beginning of the year. The ISM survey showed that its non-manufacturing PMI jumped to 59.9 in January, from 55.9 in the prior month. The US economy kept expanding even before the stimulus from a $1.5T tax cut program has begun to filter through. However, that is likely to cause some concerns that the country's economy could overheat.

The Australian retail sales data as well as the RBA interest rate statement added to the strength of the Aussie against the US Dollar. The first-mentioned report caused a 0.24% or 19 pips drop in the pair, followed by a 0.15% decline on the RBA release.

The Australian Bureau of Statistics revealed that the country's retail sales eased more than anticipated in December, but still made a rebound in the final quarter of 2017. Retail sales fell 0.5% in the reported month, following an upwardly revised 1.3% increase registered previously. In the further release, the Reserve Bank of Australia stuck to its upbeat assessment of the country's economy, keeping the key interest rate unchanged at 1.50%.

The pair bounces from session low at 108.45 on Tuesday, after extension of Monday’s strong fall threatened key near-term support at 108.28 (26 Jan low).

Strong bearish acceleration on Monday came after repeated failure to clear important double-Fibo barriers at 110.26/32 (Fibo 61.8% of 111.48/108.28 and Fibo 38.2% of 113.63/108.28) which heavily weighs on near-term action.

Fresh weakness was triggered by strong fall in global equities which boosted yen’s safe-haven appeal in fresh risk-off action.

Bounce off 108.45 low extended above 109 handle and is seen as hesitation ahead of 108.28 pivot but also as positioning for renewed attack at 108.28 target.

Falling 10SMA (109.25), which so far capped recovery attempts, along with Fibo 38.2% of 110.48/108.45 bear-leg, should ideally keep the upside limited, to keep immediate bears intact.

However, stronger upticks cannot be ruled out and expected to stall under the top of thick hourly cloud (109.84).

Overall outlook remains bearish and favors further weakness, with eventual break below 108.28 pivot to open psychological 108.00 support and unmask key med-term support at 107.31 (08 Sep low).

Alternative scenario requires firm break above 110.00 barrier (falling 20SMA) and cracked Fibo resistances at 110.26/32, to neutralize bears and shift focus higher.

Res: 109.31, 109.47, 109.70, 110.00
Sup: 109.00, 108.45, 108.28, 108.00

The Euro is holding within approx. 80-pips range on Tuesday and consolidating above new low at 1.2350, posted after two-day fall.

Upside attempts were heavy above 1.2400 and so fat limited by broken rising 10SMA which now reverted to resistance (currently at 1.2416).

Prevailing risk-off mode would keep the upside limited and keep in play risk of retesting key near-term supports at 1.2336/34 (29/30 Jan double-bottom) and 1.2300 (Fibo 38.2% of 1.1915/1.2537 upleg / rising 20SMA), loss of which will generate stronger bearish signal for deeper correction.

Conversely, break and close above 10SMA would sideline downside threats and shift near-term focus higher as overall structure is bullish.

Res: 1.2415, 1.2434, 1.2474, 1.2490
Sup: 1.2350, 1.2334, 1.2300, 1.2226

EUR/USD

Current level - 1.2396

Current rebound above 1.2350 should be considered corrective and I expect 1.2440 minor resistance to cap the upside, for a continuation of the downtrend towards 1.2220 area. Crucial on the upside is 1.2475 high.

USD/JPY

Current level - 109.01

The break through 109.70 led to a slide all the way down to 108.30 lows and my outlook is positive above the mentioned support, for a rise towards the upper boundary of the range at 110.20-50. Crucial on the downside is 108.30 and a violation of that low will challenge 107.30.

GBP/USD

Current level - 1.3955

Yesterday's slide has reached the support area above 1.3910, but my outlook remains bearish below 1.4030, for another leg downwards, to 1.3800 zone. Crucial on the upside is 1.4090.

It is a revenge trade, it's time for the Bears to take their revenge
The short squeeze happened when the VIX index exploded above the 30 mark
No panic buying for safe haven-gold

We all know one thing which is, that markets usually grind to the upside but fall like a rock. Recently the nature of the sell-off that we are experiencing in the market can simply be classified by using one term: revenge trade. Traders have been looking at the market for the past year moving in one direction which was skewed to the upside. Now, it's time for the Bears to take their revenge and the Dow Jones is set for it's worst monthly drop since 2008.

By looking at the Dow, the question's which comes to the mind is, what does this mean for all of the people who have been shorting volatility? Well, This is only a start. A trend which you don't see that often, but we have been witnessing it for the last two weeks; traders were taking long bets on the vix index and call options have been more popular for the last two days. The short squeeze happened when the index exploded above the 30 mark, you could tell that the bears are feeling the pain. If this rout continues, I would say we are likely to go above the 60 mark. The VIX index is having it's best month since 2008.

US futures and European markets are trading in a deep red territory and the S&P 500 suffered it's worst one-day loss since 2011, being ready to face more damage. This is what you call revenge.

The fear behind this sell-off is the economic data is improving in the US and this would stimulate the Fed to take more aggressive action towards their monetary policy stance. But, it would be foolish to think that the Fed is going to sit on it's hand and do nothing when the economic health of the country is improving. We would say that investors should not be worried about the fact that the improving health conditions of the country requires normal conditions.

The sell-off in the market is nothing more than just long overdue market correction. As there is no fundamental situation which has made matters worse. The earnings season has told us one story that corporate profits are strong and the consumer confidence shows that investors are comfortable with their spending. Under these conditions, the only thing which can be blamed for the kind of sell-off which we experienced yesterday is a machine- AKA high-frequency trading. Aglos triggered once again! The regulators need to address this issue because a drop like this is worse than anything on the street, we are talking about real companies with revenue streams.

Another reason why we think that this is a healthy correction is that we are not seeing any panic buying for safe haven-gold. Usually, investors would park their funds in gold and the price of gold would reflect that. But, under the current circumstances, we aren't seeing hot honey (yes I mean honey) isn't flowing into gold. Because under a real panic situation, we would have seen more than $40 move in a single day for the gold price.

Cryptocurrency

If there is anything which is selling at a massive discount, it has got to be your cryptocurrencies. Bitcoin is down nearly -69.29%, that is some discount- but that is if Bitcoin going to return to it's all-time high. We have broken the $6000 mark, the low of the day is 5992 and this indicates that we are very close to the bottom. It is certainly possible that we could drop still a little more, but we do think that the current sell-off is heavily oversold by any measure. One may want to pay less attention to adverse headlines and look at the price curve more closely. Why? You need to think who is abandoning the ship and who is coming on board or filling their tanks.

The U.S dollar has moved sharply lower against the Japanese yen, as global equities prices plummet lower, following a broad-based shift towards risk-off trading sentiment. The USDJPY pair has fallen to a new monthly-low, hitting 108.45 overnight, after the Nikkei225 index suffered its biggest one-day decline since November 1990. Price-action on the pair has now recovered slightly heading into the European trading session, with buyers and sellers testing overall demand around the pivotal 108.98 level.

The USDJPY pair still retains a strong bearish bias while trading below the 108.98 level, further losses towards 108.45 and 107.80 seem likely.

If USDJPY buyers can push the pair above the 108.98 level, we may see a correction back towards the 109.44 and 109.77 levels.

The euro has moved sharply lower against the U.S dollar overnight, hitting 1.2350, as risk-off trading sentiment prompted traders to move into the greenback. The EURUSD pair currently trades around the 1.2375 level, with downside pressure building on the single currency, with European stock markets set to open into heavy selling. Going forward, the 1.2400 level on the EURUSD pair remains the key daily pivot point intraday traders are watching.

The EURUSD pair is likely to suffer further intraday declines while trading below the 1.2400, downside support is currently located at the 1.2350, 1.2322 and 1.2275 levels.

If buyers can move price-action above the 1.2400 level, we may see an upside correction on the EURUSD pair towards the 1.2432 level.

Data watchers will be able to take a breather on Tuesday, as no major releases are expected. That being said, there are a few interesting tidbits that could impact the direction of currency pairs.

The first is a German report on factory orders, which is scheduled for release at 07:00 GMT. German factory orders are forecast to climb 0.6% in December, which translates into a year-over-year gain of 3.1%. That follows a 0.4% drop the previous month.

Shifting gears to North America, the US Department of Commerce will issue its latest trade balance covering the month of December. Washington’s deficit is forecast to rise to $52 billion from $50.5 billion in November.

North of the border, the Canadian government is expected to post a narrower trade deficit of $2.2 billion for December, down from $2.54 billion the month before.

In monetary policy, Federal Reserve Bank of St. Louis President James Bullard will deliver a speech at 13:50 GMT. As investors recall, the Federal Reserve held off on raising rates last week but is likely to pursue a rate adjustment at its next meeting.

Earlier in the day, the Reserve Bank of Australia (RBA) held its trend-setting interest rate at 1.5%, as was expected by virtually every analyst following the central bank. That being said, the outlook on the domestic economy remains robust.

“The Bank's central forecast for the Australian economy is for GDP growth to pick up, to average a bit above 3 per cent over the next couple of years,” the RBA said in its official statement. “The data over the summer have been consistent with this outlook. Business conditions are positive and the outlook for non-mining business investment has improved. Increased public infrastructure investment is also supporting the economy. One continuing source of uncertainty is the outlook for household consumption. Household incomes are growing slowly and debt levels are high.”

AUD/USD

The Australian dollar declined sharply following the RBA rate statement, with the AUD/USD currently trading at session lows. The pair is down 0.5% at 0.7850 and faces continued downside as prices fail to extend beyond 0.7900. Overall, the market remains bearish below 0.8000. A future breakdown could expose the low from 10 January (0.709).

EUR/USD

Europe’s common currency drifted lower on Tuesday, as the US dollar continued its long recovery from multi-year lows. EUR/USD dipped 0.1% to 1.2364. From a technical perspective, the pair faces immediate support at the 30 January low of 1.2335.

USD/CAD

The greenback strengthened against its northern rival on Tuesday, climbing 0.2% to 1.2550 CAD. The USD/CAD has bounced sharply from Friday’s low of 1.2260. However, the pair remains vulnerable to pullbacks driven by upbeat Canadian data.