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Pound is attempting to stabilize above 1.3900 handle which was retested after quick fall on UK retail sales miss.

Retail sales numbers disappointed in December (m/m -1.5% vs -0.6% f/c and y/y 1.3% vs 3.0% f/c), softening near-term tone and signaling blow for hawks, looking for BoE rate hike in May.

On the other side, fears of US government shutdown keep the dollar under pressure and partially offsetting negative impact from retail sales miss.

However, risk of pullback exists as daily indicators are overbought, with additional pressure coming from significantly weaker retail sales.

Firm break below 1.3900 and session low at 1.3886 will be negative signal, but further easing and daily close in red is needed to generate firmer bearish signal and sideline immediate bulls.

Conversely, bearish threats will be neutralized on sustained break above peaks at 1.3942/45 (Wed / today) that would signal attack at psychological 1.4000 barrier.

Res: 1.3945, 1.4000, 1.4050, 1.4086
Sup: 1.3904, 1.3886, 1.3854, 1.3804

EURGBP appears poised for further losses and slipped beneath the 0.8850 barrier in the prior couple of days. Currently, in the short-term timeframe, the pair is developing between the 38.2% and the 50.0% Fibonacci retracement levels of the last significant upward movement with the low at 0.8690 and the high at 0.8923. The aforementioned levels are holding near the 0.8833 resistance level and the 0.8805 support level respectively.

In addition, the pair posted two positive days in a row following the rebound on the 0.8800 psychological level. In case of upward correction, the price could hit the 0.8850 obstacle and the 23.6% Fibonacci level at 0.8867. It is worth mentioning that the price needs to go through the 20 and 40 simple moving averages in the 4-hour chart, which are standing at 0.8847 and 0.8863 respectively.

On the flip side, the price could drop until the strong support area of 0.8790 – 0.8800. A break below could push the euro/pound lower towards the 61.8% Fibonacci mark near 0.8780.

During the previous sessions, the two SMAs (20 and 40) posted a bearish crossover, indicating a continuation of the sell-off. The RSI indicator is sloping to the upside in the negative territory, however, the stochastic oscillator recorded a bullish crossover within the %K line and the %D line, signaling for a pause of the downward movement.

Having a brief look at the daily timeframe, EURGBP has been trading within a downward sloping channel since October 2017, endorsing the scenario for a slight bearish behavior in the medium-term.

WTI crude oil futures have traded lower in the prior three days following the pullback on the fresh three-year high of 64.80. When looking at the bigger picture the price is endorsing the scenario for further gains, however, in the short-term timeframe a bearish correction is possible.

The price slipped below the 161.8% Fibonacci retracement level at 63.65 of the last big downward movement with the high at 55.40 and the low at 42.00. If price action remains below 63.65, there is scope to test the 62.18 support level, which holds slightly above the 20-day simple moving average. Falling below it would see prices re-test the 59.00 handle and then below there would be a touch near the 58.50 support level.

In case of a run above the 161.8% Fibonacci mark, then the focus would shift again to the upside towards the 3-year high of 64.80. Moreover, if the latter level breached, this would increase upside pressure and extend the gains towards the next level of 68.00 taken from the low of December 2009.

In the daily timeframe, momentum indicators are confirming the recent bearish correction. The Relative Strength Index (RSI) is falling after the bounce off the overbought zone, whilst the MACD oscillator is weakening and dropped beneath its trigger line, creating a bearish crossover in the prior sessions. As a side note, the price has been developing in an ascending move since June 2016.

Crude prices all as OPEC rises oil supply forecast

Crude oil prices tumbled during the Asian session after OPEC revised its non-OPEC oil supply forecast for 2018 to the upside. The price of WTI fell by 1.40% to $62.85 a barrel before stabilising above the $63 threshold. The price of Brent followed a similar pattern as it slid to $68.30 before consolidating a few cents higher. In its monthly market report, the oil cartel expects non-OPEC supply growth to reach 1.15 million barrels per day – this is an upward revision of 160k barrels per day compared to previous estimates. This increase in forecast in mostly driven by higher growth expectations for the US and Canada.

On Thursday, the EIA reported that US inventories contracted by 6.9 million barrels from the previous week, while market participants were expecting a smaller decrease of 3.1 million barrels. US stockpiles have been shrinking continuously since April 2017, falling to 413 million barrels compared to 536 million. Yesterday's surprise reduction was of little help in boosting oil prices, as speculators are already long crude oil (net long non-commercial positions topped 25% of total open interest, according to the CFTC).

Against the backdrop of higher growth production and faltering demand, the oil outlook remains quite cloudy. The price of black gold has enjoyed a nice ride since last summer as OPEC members trimmed down production. Even though we are not ahead of a massive correction, we believe that the upside is quite limited.

The Bank of Canada confirms its rate hike despite NAFTA Trade Agreement uncertainties

The Bank of Canada's Governing Council confirmed an increase of its overnight interest rate on Wednesday of 25 bps to reach 1.25% following strong economic data ahead of NAFTA's sixth out of seven scheduled rounds of negotiations. By raising its interest rate, Canada confirms the healthy conditions in which its economy and its partners are lying to right now and maintains inflation on target. With a jobless rate of 5.70% (lowest rate since September 30th 2007) and Y/Y November CPI of 2.10%, the Canadian economy is approaching full employment capacity but this doesn't suffice for having investors to neglect coming difficulties it might have to overcome next week NAFTA meeting (January 23rd 2018). The loonie instantly fell by 0.8% (CAD/USD remaining at 0.8054; +1.05% YTD though) against the greenback following BoC Governor Stephen Poloz's recall of uncertainties surrounding NAFTA's denouement, as the impact of slowing foreign direct investment is already hampering the economy.

Trump's aggressive protectionism policy also poses considerable difficulties for US industrials and farmers who warned Trump not to quit NAFTA, as tariffs could considerably escalate and render American producers' prices less attractive for their neighbors (Mexico and Canada being equivalent to 34% of US total exports as of 2016 according to the Congressional Research Service).

We remain confident that the occurrence is unlikely, as the stakes are too high to be dismissed. Even Donald Trump confirmed to the Wall Street Journal last week that he would be “a little bit flexible” on the matter.

The Aussie is firmly above 0.80 handle and hit new four-month high at 0.8038 on Friday, boosted by fresh weakness of the greenback on fears of US government shutdown.

Fresh extension of larger uptrend from 0.7500 (8 Dec low) focuses 0.8102 (20 Sep spike high) and key 0.8124 barrier (8 Sep peak, the highest since May 2015).

Overbought daily studies continue to warn, but without firmer bearish signals for now.

Broken psychological 0.80 barrier now acts as support and is expected to keep the downside protected and guard higher base at 0.7940 and rising 10SMA at 0.7921.

The pair is on track for the sixth straight weekly bullish close which is seen as strong bullish signal for further advance.

Res: 0.8038, 0.8065, 0.8102, 0.8124
Sup: 0.8000, 0.7940, 0.7921, 0.7895

The pair remains firmly in red on Friday and accelerated lower on fresh political uncertainty in the US which pressured the greenback.

Fresh weakness dipped to 110.49, retracing the biggest part of 110.19/111.48 recovery leg and turning focus towards key supports at 110.15/00 (Fibo 61.8% of 107.31/114.73 rally / psychological support).

Bearish structure is highlighted by negative momentum studies and daily MA’s in firm bearish setup.

Falling 10SMA maintains strong pressure after capping recovery attempt and previously forming death-cross on break below 200SMA.

Firm break below 110.15/00 pivot would open way for fresh extension of bear-leg from 113.38 2018 high, posted on 08 Jan) towards targets at 109.54 (15 Sep spike low) and 109.06 (Fibo 76.4% of 107.31/114.73 rally).

Alternative scenario requires bounce trough falling 10SMA (currently at 111.33) to sideline immediate downside risk, but stronger acceleration through 200SMA (111.70) and 50% of 113.38/110.19 fall (111.78) is needed to neutralize and reverse bias to bullish mode.

Res: 110.83, 111.16, 111.33, 111.70
Sup: 110.49, 110.15, 110.00, 109.54

Fresh bullish extension on Friday pressures new post-Brexit vote recovery high at 1.3942 (Wednesday's spike high). Cable maintains strong bullish sentiment and eyes psychological 1.4000 barrier for test, as weaker dollar underpins. Strong momentum studies confirm the strength of the uptrend, with daily RSI and slow stochastic moving sideways in overbought territory, sidelining immediate risk of pullback. UK retail sales are in focus for fresh signals. Forecast shows weaker reading in December (m/m -0.6% vs 1.1% previous month) while annualized retail sales figure is forecasted at 3.0% in Dec, well above 1.6% in Nov. Release above forecasts could boost pound for eventual probe above 1.40 barrier (FE 138.2% of current wave C of five-wave sequence from 1.3038) and trigger further acceleration on upbeat figures. Conversely, sterling may lose traction on retail sales miss. Session low at 1.3886 (Asia) marks initial support, followed by Thursday's low at 1.3804.

Res: 1.3942, 1.4000, 1.4050, 1.4086
Sup: 1.3886, 1.3854, 1.3804, 1.3756

The Euro remains firm on Friday and extends recovery from 1.2165 (Fibo support / Thursday’s low) where corrective dip off 1.2323 peak found support.

The single currency was boosted by fresh weakness of the dollar, pressured by fears about potential shutdown of the US government, as lawmakers failed to reach an agreement on a federal budget.

Fresh near-term bullish sentiment is building up and turning focus towards 1.2323 (17 Jan peak).

Full retracement of shallow correction from 1.2323 to 1.2165 would signal continuation of broader uptrend and expose projected targets at 1.2383 (Fibo 138.2%) and (1.2420 (Fibo 161.8%).

Hourly Tenkan-sen marks initial support at 1.2255, followed by top of hourly Ichimoku cloud (1.2244) and hourly trough (1.2219), which is expected to hold corrective dips and keep fresh near-term bulls intact.

Key near-term support lies at 1.2165 and break here will be bearish.

Res: 1.2288, 1.2296, 1.2323, 1.2383
Sup: 1.2244, 1.2219, 1.2200, 1.2165

EUR/USD

Current level - 1.2272

The reversal at 1.2160 signals a prolonged consolidation pattern and despite the positive intraday bias there is still a chance for a dip to 1.2090 before renewal of the general uptrend towards 1.2500. Key intraday support lies at 1.2217.

USD/JPY

Current level - 110.68

The pullback below 111.00 has neutralized the positive bias and current situation is neutral. Initial resistance lies at 111.20 and a violation of 110.20 low will challenge 109.50 zone.

GBP/USD

Current level - 1.3917

The consolidation pattern here is still underway and while trading remains capped below 1.3940 peak there will be a chance for another dip to 1.3800 before climbing beyond 1.4000 hurdle.

Currency pair EUR/USD

The EUR/USD uptrend still remains intact due to the bullish bounce at support. A bullish breakout above the resistance trend line (dotted red) could indicate the uptrend continuation towards the Fibonacci targets of wave 5 (blue).

The EUR/USD bounced at the support trend line (blue) and Fibonacci levels of wave 4 (green). Price is now breaking above the resistance trend line (dotted red), which could spark a larger uptrend continuation towards the Fibonacci targets of wave 5 (green). However, price still faces a larger resistance zone above it (dark red box).

Currency pair GBP/USD

The GBP/USD bounced at the 23.6% Fibonacci level of wave 4 (green) and price is building a bullish channel. A break below the channel could see price test the 38.2-50% Fibonacci support levels.

The GBP/USD is building a potential wave B (blue) correction within a larger ABC. A bullish break above the round level of 1.40 invalidates the ABC correction and indicates an immediate uptrend continuation.

Currency pair USD/JPY

The USD/JPY bullish breakout is not seeing any follow through and is now retesting the support levels (blue).

The USD/JPY is probably in a wave 1 (purple) but price is also building a triangle pattern (red/blue) and the trend direction will depend whether price is able to break above resistance (red) or below support (blue).