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Copper price accelerated lower on Tuesday, signaling extension of pullback from $3.3200 high on break below four-day congestion floor at $3.1790.

Fresh weakness was sparked by surge in copper inventories which signal healthy supplies and pressuring metal's price.

Bearish acceleration took out support provided by 55SMA ($3.1418) and dented Fibo support at $3.1312 (50% retracement of $2.9425/$3.3200 rally), eyeing next support at $3.1066 (100SMA) and $3.1000 (top of daily Ichimoku cloud).

Daily cloud twists next week and could attract for further weakness, with extended dips expected to find footstep above $3.0867 (Fibo 61.8%) to keep bulls intact.

Daily indicators are heading south, with momentum deeply in the negative territory and slow stochastic being strongly oversold, showing space for further fall but suggesting that corrective bounce could be expected in the near-term. Bearish scenario sees close below $3.0867 pivot as negative signal for deeper correction.

Res: 3.1312; 3.1418; 3.1758; 3.1973
Sup: 3.1066; 3.1000; 3.0867; 3.0525

Markets

Global core bonds corrected higher today with US Treasuries outperforming German Bunds. The move is mainly technically inspired. The newly approved short term funding bill triggered a test of key resistance levels in US yields (eg 2.42% for 5-yr and 2.63%/2.64% for 10-yr), but a sustained break didn't occur and caused some return action. German Bunds had a small upward bias as well with markets taking into account that the ECB probably won't change its communication policy already at Thursday's meeting. A very strong German ZEW-indicator (both current situation and expectations) couldn't change that. The German curve flattens at the time of writing with yield changes ranging between +0.1 bp (2-yr) and -1.9 bps (30-yr). From a technical point of view, the German 10-yr yield remains in the narrow 0.50%-0.60% channel. The US yield curve drops 1.2 bps (2-yr) to 3.1 bps (10-yr) lower. 10-yr yield spread changes versus Germany range between +1 bp (Ireland) and -2 bps (Portugal/Italy/Spain). Greece outperforms (-5 bps). Markets digested huge new supply quite well. The Kingdom of Spain raised €10bn with a new 10-yr bond (Apr2028) at MS +46 bps. Order books exceeded €45bn. Friday's rating upgrade by Fitch to A- (stable outlook) couldn't have come on a better time.

The price action in EUR/USD was similar to yesterday. EUR/USD hovered in the 1.22 big figure. Both the US government shutdown and its solution were no big issue for FX trading. German ZEW economic sentiment was very strong, but had little impact on the euro. EUR/USD trades is in the 1.2260 area, little changed from the start in Europe. Market statistics suggest that investors are positioned long euro ahead of the ECB meeting. For now, there is no trigger to change this positioning in a profound way. USD/JPY faced some intraday repositioning after the BOJ's policy meeting. Initially, it seemed that soft speak of BOJ Kuroda would push USD/JPY north of 111. However, an easing of global risk sentiment later in the session,and an overall softer dollar pushed USD/JPY back lower in the 110 big figure. Both EUR/USD and USD/JPY hold within the established ranges, but the overall picture of the dollar looks fragile. Especially USD/JPY and the trade-weighted dollar fail to move away from ST support levels.

Over the previous days, sterling was in good shape even as there was little hard news to support the move. The sterling rebound ran into resistance today. UK eco data were not to blame. The UK December budget deficit was small. CBI order data suggest a constructive momentum in the manufacturing sector and rising pricing power. However, it didn't help any further sterling gains. EUR/GBP regained a few ticks, but holds below the 0.88 mark (currently 0.8775 area). Cable trades slightly off the 1.40+ peak despite overall USD softness.

European equities show modest gains (0.25%-0.50%) as momentum eased after a strong start. US indices open little changed as the earning season gears up. Is time ripe for the impressive 2018 rally to shift into a lower gear?

News Headlines

British manufacturing grew strongly in January, helped by export demand. At the same time, the proportion of factories expecting to raise prices hit a 34-yr high, a CBI survey showed. The CBI order book balance eased to +14 from a peak of +17 in December. The CBI's prices balance rose to +40 from +23, its highest since January 1984.

German ZEW investor sentiment improved further in January, ignoring the political stalemate in the formation of a new government. ZEW economic sentiment rose to 20.4 from 17.4. The index measuring investors' assessment of the economy's current conditions rose to 95.2 from 89.3, the highest level since the survey began in 1991.

Brazil's inflation returned within the official targeted range for the first time in six months. Consumer prices tracked by the benchmark IPCA index rose 3.02% Y/Y in January, according to state statistics agency IBGE.

Here are the latest developments in global markets:

FOREX: The yen posted a strong rally towards an intra-day high of 110.38 (+0.38%) per dollar during early European trading hours. This came after a decline earlier in the day when the BOJ chief, Haruhiko Kuroda, downplayed plans on stimulus reduction. Upbeat data on Eurozone's ZEW economic sentiment offered little for the euro, with euro/dollar recovering to 1.2256 (-0.13%). Pound/dollar dipped into losses, falling to 1.3944 (-0.30%) after touching 1.4000 during the Asian session. The bigger loser, though, was aussie/dollar which dropped to 0.7961 (-0.65%) as protectionist trade measures in the US threatened global trade activities and signaled an equivalent response by China. The dollar index was steady at 90.42.

STOCKS: European stocks jumped to new highs on Friday as the US government was in the process to reopen, while optimism on earnings releases gave fresh legs to the markets. The pan-European STOXX 600 hit a fresh 2 ½ -year high, trading 0.30% higher at 1045 GMT. The index was driven by Carrefour's shares which increased by 6.5% after the company announced its plans to cut costs and launch a new partnership with its Chinese groups. The blue-chip Euro STOXX 50 climbed by 0.30% as well. The French CAC 40 inched up by 0.14% to 11-year peaks, while the German DAX and the British FTSE 100 surged to record peaks, rising 0.83% and 0.14% respectively.

COMMODITIES: Oil prices gathered tailwinds after the IMF revised its growth prospects to the upside for the Saudi Arabian economy in the face of rising oil prices. It also raised its growth forecasts for the world economy. WTI crude went up by 0.47% on the day to $63.47 per barrel and Brent increased by 0.35% to $69.27. Gold rose by 0.26% to $1,337.50 per ounce.

Day ahead: Eurozone flash consumer confidence pending; Eyes in Davos

In the Eurozone, preliminary readings on consumer confidence – due at 1500 GMT – are said to remain in positive territory in January for the third consecutive month, edging up by 0.1 points to +0.6. Note that, the index, which tracks future economic prospects, has been below 0 since 2001.

In oil markets, investors will be looking forward to the API weekly report delivered at 2135 GMT to see whether US crude oil inventories continue to fall, giving a further boost to oil prices.

However, the ongoing World Economic Forum annual meeting in Davos, Switzerland, will be of greater importance for market watchers over the next four days as world leaders and business delegates are gathering to discuss on global topics. Investors are potentially widely expecting a speech by the US President, Donald Trump, who recently achieved his first legislative victory in office, promising massive tax cuts for businesses and individuals, thereby creating a more attractive US business environment. Still, Trump's attendance has not been confirmed yet, with the House Press Secretary, Sarah Saunders saying on Monday that the president will travel to Davos only if the" government reopens as expected".

In Montreal, representatives of Canada, the US, and Mexico, are scheduled to begin the sixth round of NAFTA negotiations, which will conclude next Monday. The outcome of these negotiations could play a large role in determining the near-term bias of both the Canadian dollar and the Mexican peso. Let's not forget that the Bank of Canada described the future of NAFTA as the most significant downside risk the economy faced, after hiking its benchmark interest rate last week.

In other economic events, the US Senate Banking Committee will hold a hearing on the nomination of Marvin Goodfriend to be part of the FOMC board at 1500 GMT. Later in the day, the Chicago Fed President will give introductory remarks before the Chicago Council on Global Affairs conference: "The Future of Monetary Policy: Embracing the Unconventional" at 2330 GMT.

Formal coalition talks in Germany are expected to start this week after Merkel's Conservatives (CDU) and Social Democrats (SPD) approved a deal to form a new government on Sunday.

In stock markets, earnings releases today include quarterly reports from Johnson & Johnson, Procter & Gamble, and Verizon before the US market opens.

Indices Remain Near Record Highs as US Government Shutdown Ends, For Now

US futures have turned lower ahead of the open on Tuesday having earlier been indicating a higher open on Wall Street. Dow futures had been pointing to a more than 60 point gain prior to the 100 point drop. Still, futures are now only marginally lower and come following new records being set on Monday.

Monday's gains came as the government shutdown came to an end after only three days, two of which occured over the weekend. A spending bill passed through the Senate and the House on Monday which will enable furloughed workers to return to work, albeit temporarily, giving officials another couple of weeks to find a longer term solution. With Senate Republicans and Democrats seemingly no closer to an agreement on core immigration issues though, there's a good chance that we'll be back to square one on 8 February.

While markets were given a small boost as it became clear that the bill would pass through the Senate, there was never any real fear that a continued slowdown would have any significant negative impact on the economy. That has been the experience previously, although the country has never experienced a long shutdown that may bring more significant consequences.

Tuesday is looking a little quiet on the economic data side, with eurozone consumer sentiment the only notable release. From a US perspective, there'll be more attention on earnings with 16 S&P 500 companies reporting on the fourth quarter including three from the Dow 30. It's been a good start to earnings season, with those that have already reported having broadly speaking lived up to high expectations.

JPY Higher as BoJ Leaves Monetary Policy Unchanged

The Bank of Japan monetary policy announcement went largely as expected overnight, with the central bank making no changes while downplaying small variants in purchases each month. It also stressed its commitment to maintaining its policy of keeping the 10-year yields around 0% until inflation returns to target, which it's far from doing now.

10-Year JGB Yield Daily Chart

Source – Thomson Reuters Eikon

At the same time, it did sound a little more upbeat than previously on inflation expectations which appears to have lifted the yen, with the dollar down around half a percent, the euro a little more and the pound more again. I'm not convinced we can read too much into this though with expectations still very low and unlikely to rise to target any time soon.

Bitcoin Eyeing Sub-$10,000 as Sell-Off Continues

Bitcoin is trading in the red for a third session and is threatening to break back below $10,000 again today, having done so last Wednesday for the first time since the start of December. It would appear that despite losing half its value since peaking on 17 December, the rout may not be over. It's not just bitcoin that's having a bad day, similar losses are being seen throughout the cryptocurrency space with speculators clearly not as keen to buy the dips as they were in early December.

Investors marched into Tuesday's trading session adopting a "risk-on" attitude after US lawmakers reached a deal to end a government shutdown.

Asian stock markets ventured higher during early trading on Tuesday, following Wall Street's record gains overnight. In Europe, shares climbed to fresh highs as optimism over sustained global growth continued to boost risk sentiment. With Wall Street powering to all-time highs on Monday as markets cheered the end of a three-day government shutdown, US stocks could remain buoyed by the positive sentiment this afternoon.

Dollar struggles to hold ground

It's remarkable how the Dollar still remains mired near three-year lows despite President Trump signing a bill to end a US federal government shutdown. There is a suspicion that one of the culprits behind the Dollar's weakness could be mounting concerns over the United States stance on global trade. With the Greenback still susceptible to further losses, as other major banks gradually tighten monetary policy, the Dollar Index remains heavily bearish. Taking a look at the technical picture, the Index is under pressure on the daily charts with technical lagging indicators such as the MACD and 50 Simple Moving Average going in line with the bearish bias. The 91.00 level is in the process of transforming into a new lower high. A breakdown below 90.30 could encourage a decline towards 90.00 and 89.60, respectively.

Currency spotlight - GBPUSD

A renewed sense of optimism over the Brexit negotiations pushed Sterling above 1.40 during Tuesday's trading session.

While the lion's share of Sterling's gains this year can be attributed to ongoing Dollar weakness, the gains could partially be due to the renewed hopes of a "soft Brexit". With the economic calendar fairly light today, price action is likely to dictate where the GBPUSD trades. From a technical standpoint, the currency pair is firmly bullish on the daily charts. The breakout above 1.3850 resulted in prices trading towards 1.3920 and 1.4000, respectively. A technical correction could be in the process with the next level of interest at 1.3900. Alternatively, a daily close above the 1.4000 could invite an incline towards 1.4070.

Commodity spotlight - Gold

Gold had a slight sparkle on Tuesday as the Dollar remained depressed around three-year lows.

The yellow metal remains bullish on the daily charts and has the potential to venture higher amid the weakening US Dollar. From a technical standpoint, the fact that there have been consistently higher highs and higher lows verifies the bullish bias on the daily charts. A technical breakout and solid weekly close above the $1340 level could encourage a further incline higher towards $1360. Bulls remain in firm control above the new $1324.15 higher low.

CRUDE OIL - The commodity looks to resume its upside pressure. On the downside, support resides at the 63.50 level where a break will expose the 63.00 level. A cut through here will set the stage for a run at the 62.50 level. Further down, support resides at the 62.00 level. On the upside, resistance resides at the 64.50 level. Further out, resistance comes in at the 65.00 level. A break above here will aim at the 65.50 level and then the 66.00 level followed by the 66.50 level. Its daily RSI is bullish and pointing higher suggesting further strength. All in all, CRUDE OIL remains biased to the upside long term

The euro is slowing moving lower against the U.S dollar, with price-action again struggling to find meaningful buying interest above the key 1.2258 pivot area. The EURUSD pair earlier looked past strong ZEW data from German and eurozone economies, with price continuing to hold in a tight trading range between 1.2230 and 1.2270. Going forward, a strong technical breakout looms for the EURUSD pair, ahead of the all-important European Central Bank policy meeting this coming Thursday.

The EURUSD pair will see downside pressures building while price-action trades below the key 1.2258 level. Key technical support is found at 1.2200 and 1.2150.

Should the EURUSD pair move above the 1.2258 level, buyers will look to attack the 1.2270 and 1.2320 resistance points.

The U.S dollar has slipped sharply lower against the Japanese yen during the European trading session, after a bearish higher-time frame close below the 110.80 level. Price-action on the USDJPY currently trades around the 110.40 level, as sellers start to take control of the pairs intraday directional bias. The move lower in the pair was sparked by a reversal in stocks, and a minor bounce higher in the U.S dollar index. Traders now look to Manufacturing data coming from the United States, and the key 110.00 technical support level on the USDJPY pair.

USDJPY intraday sellers have now taken control of the pair below 110.80 level, downside targets remain 110.00 and 109.80.

Should USDJPY buyers push price-action back above the 110.80 level, strong resistance is then found at the 111.22 and 111.48 areas.

USD/CAD has posted gains on Tuesday, erasing the gains which marked the Monday session. Currently, the pair is trading at 1.2477, up 0.27% on the day. On the release front, there are no Canadian events. In the US, the sole indicator is the Richmond Manufacturing Index, which is expected to edge lower to 19 points.

US President Trump has threatened to cancel the pact unless Mexico and Canada make major concessions to the US. If the agreement is terminated, the Canadian dollar would likely take a tumble. Another round of negotiations is slated to be held in Montreal next week, and a lack of progress could weigh on the Canadian dollar.

The NAFTA free trade agreement is critical for the Canadian economy, so threats by US President Trump to blow up the agreement are causing genuine concern for the Bank of Canada. Negotiations between Canada, Mexico and the US have not yielded much progress, and a sixth round of negotiations start on Tuesday. Trump has repeatedly said he is unhappy with the deal, and an advisory council to Canadian Foreign Minister Chrystia Freeland sounded pessimistic about a new trilateral deal being reached. Still, Trump is unpredictable, and there are also many US companies that benefit from the current deal and are opposed to the US pulling the plug. If NAFTA is terminated, it's likely the Canadian dollar will take a tumble.

The US government shutdown is over, after just three days. On Monday, the Senate voted 266-150 to extend funding until February 8. This stopgap measure will enable the government to provide services during that time, but the parties will have to hammer out a longer-term agreement. The Democrats held up a funding bill last week, in order to force the Republicans to the table over illegal immigration. The Republicans have promised to hold a vote on this issue, but many Democratic lawmakers remain skeptical that President Trump and the Republicans will deal in good faith over immigration.

Daily Pivots: (S1) 110.54; (P) 110.88; (R1) 111.27; More...

USD/JPY dips notably today but stays in range of 110.18/111.47. Intraday bias remains neutral at this point. On the upside, break of 111.47 will affirm the case that correction from 114.73 is finished with three waves down to 110.18. Intraday bias should then be turned back to the upside for 113.38 resistance for confirmation. However, below 110.18 will extend the correction lower. But we'd again look for bottoming signal in next fall.

In the bigger picture, we're holding on to the view that correction from 118.65 is completed at 107.31. And medium term rise from 98.97 (2016 low) is going to resume soon. Sustained break of 114.73 should affirm our view and send USD/JPY through 118.65. However, break of 107.31 will dampen this view and extend the medium term fall back to 98.97 low.