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The Canadian dollar continues to move sideways this week. In the Tuesday session, the pair is trading at 1.2423, up 0.03% on the day. On the release front, Canada releases Housing Starts, with an estimate of 240 thousand. In the US, today's key event is JOLTS Job Openings, which is expected to climb to 6.05 million. On Wednesday, Canada releases Building Permits.

After a strong December, the Canadian dollar hasn't missed a beat in January, with gains of 1.2% percent. Recent economic indicators have pointed upwards, led by sizzling employment numbers. The economy added 78.6 thousand jobs, crushing the estimate of 1.8 thousand. In November, the economy added 79.5 thousand. The unemployment rate dropped to 5.7%, down from 5.9% a month earlier. The strong numbers sent the Canadian dollar higher on Friday. Last week marked a third winning week for the rejuvenated Canadian dollar, and on Friday the currency hits its highest level against the US dollar since late September.

Much of the Canadian dollar's recent climb can be attributed to the rise in oil, which has jumped 6.8% since mid-December. Geopolitical tensions have boosted oil prices, in particular tensions with North Korea and the recent civil unrest in Iran. There is pressure on the Bank of Canada to raise its benchmark rate of 1.0%, which is lagging behind the Federal Reserve rate of between 1.25%-1.50%. With the Fed widely expected raise rates in January, the Canadian dollar could lose ground if the BoC fails to respond with a rate hike of its own on January 17. However, the BoC may hold back, as it concerns continue over US threats to dismantle the free trade agreement.

Interest rates may be in the headlines, but another important parameter is the Federal Reserve's balance sheet. As of this month, the Fed has started to shrink its massive balance sheet of $4.4 trillion. The balance sheet ballooned during the financial crisis of 2008-2009, and good times have allowed the Fed to begin trimming its portfolio. Incoming Fed Chair Jerome Powell, who takes over in February, has estimated that the balance sheet could drop to anywhere between $2.4 trillion to $2.9 trillion after several years of cuts. Fed policymakers have not indicated a magic number for the balance sheet, but the cuts indicate a vote of confidence in the US economy.

The CAC index has posted gains in the Monday session. Currently, the index is at 5515.00, up 0.50%. On the release front, France's trade deficit widened to EUR 5.7 billion, above the forecast of EUR 4.8 billion. This marked the highest trade deficit since August.

Stock markets have jumped out of the gates in 2018, and the CAC has jumped onto the bandwagon, posted strong gains of 3.8% in January. Investors are giving the eurozone economy a thumbs-up, as the bloc is on track for a solid fourth quarter, as growth continues and unemployment falls. Inflation has also moved higher, although the ECB is unlikely to reconsider its current stimulus program, which ends in September.

The political vacuum hasn't affected the robust German economy, but it has sidelined President Angela Merkel, arguably the head of the eurozone. French President Emmanuel Macron has grandiose plans for the further integration of the eurozone, such as harmonizing corporate tax regimes and establishing a eurozone budget. Merkel would make an ideal partner to reform the bloc, but she can't lend Macron a helping hand while she leads a caretaker government. Merkel's conservative bloc is talking with the Social Democrats, but German coalition talks tend to move slowly, and could last for several more months.

Here are the latest developments in global markets:

FOREX: The dollar pared some losses versus the yen, crawling up to 112.80 (-0.25%) after a trim of bond buying from the BOJ send the currency to a five-day low earlier in the day. Euro/dollar moved further down to 1.1924 (-0.33%) probably due to investors engaging in profit-taking, while pound/dollar corrected lower towards 1.3530 (-0.27%) on the back of a stronger greenback. The dollar index peaked at a 1 ½-week high of 92.30.

STOCKS: European stocks extended their gains on Tuesday to fresh 2 ½-year highs with consumer sectors leading the indices. The pan-European STOXX 600 was 0.30% up at 1015 GMT, boosted by news that the high indebted Netherlands-based cable group Altice, whose shares tumbled by 54% last year, agreed to restructure its European operations and separate its US unit by distributing that unit's shares to existing shareholders. The blue-chip Euro STOXX 50 also jumped by 0.30%. The German DAX 30 and the French CAC 40 surged by 0.55% while the British FTSE 100 rose by 0.32%, with the British food retailers including Marks & Spencer performing the best. Earnings reports will be in the spotlight this week.

COMMODITIES: Oil prices lost positive momentum during early European session but remained near fresh 2 ½ -year highs touched during the Asian trading hours amid expectations of a tighter market supported by falling US oil inventories and OPEC-led supply cuts. WTI crude was last trading at $61.87 (+0.23%) and Brent was steady at $67.81 after breaking brefly above the 68-key level. Gold retreated by 0.40% to $1,314.70 per ounce

Day ahead: US JOLTs job openings and Canadian housing starts eyed

Looking through the rest of the day, markets will keep a close eye on the US and the Canadian dollar as data releases associated with a medium to high-risk volatility are scheduled to be delivered during European afternoon.

At 1315 GMT, Canada will report on housing starts, with analysts expecting the annualized gauge to post a softer increase of 212,500 compared to a rise of 252,200 seen in November when the measure reached its highest level in almost a decade. Note that the Canadian government plans to impose stricter regulations on mortgage borrowers in 2018, a strategy that could weaken housing demand.

In the US, the Bureau of Labor Statistics will publish JOLTs job openings at 1500 GMT, a survey conducted to record changes in the US job vacancies. According to forecasts, in November 6.038 million positions were opened, slightly higher than 5.996 million seen in the prior month and marginally below September's all-time high of 6.177 million.

Meanwhile, Minneapolis Fed President, Neel Kashkari, who was on the opposition of monetary tightening since he took office in 2016, voting against last year's three rate hikes, will be participating in a Q&A session at 1500 GMT. However, it is worth to note that Kashkari will not be a voting member in 2018.

In addition, political developments in Germany will gather some attention as Merkel's Christian Democrats (CDU) are holding five-day talks started on Sunday with their former coalition partner Christian Social Union (CSU) and Social Democrats (SPD) in an effort to form a coalition government.

Besides that, news out of the Korean peninsula will be in focus after South and North Korea held high-level talks for the first time in more than two-years earlier today to discuss on Winter Olympic Games taking place in South Korea in February.

EURGBP appears poised for further losses and slipped beneath the 0.8850 barrier, while euro was the worst performing major currency during yesterday's trading session. The single currency had been under pressure versus sterling during the US trading session on Tuesday and ended the day near its low.

The price recorded the second straight bearish day and plummeted almost 1% following the bounce off the 0.8923 resistance level. 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 case of further losses, the price could drop until the 61.8% Fibonacci mark near 0.8780 or moreover towards 0.8760. An alternative scenario is an upward correction until the 0.8850 obstacle and the 23.6% Fibonacci level 0.8867, which is close to the 25-simple moving average in the 4-hour timeframe.

During the previous sessions, the two SMAs (14 and 25) posted a bearish crossover, indicating a continuation of the sell-off. However, the momentum indicators seem to be in confusion. The RSI indicator is sloping to the upside in the negative territory, signaling for a pause of the downward movement, but the MACD oscillator is still strengthening its negative momentum below the zero and trigger lines.

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

EURUSD - The pair continues to decline extending its corrective pullback on Tuesday. On the upside, resistance comes in at 1.2000 level with a cut through here opening the door for more upside towards the 1.2050 level. Further up, resistance lies at the 1.2100 level where a break will expose the 1.2150 level. Conversely, support lies at the 1.1900 level where a violation will aim at the 1.1850 level. A break of here will aim at the 1.1800 level. Below here will open the door for more weakness towards the 1.1750. Its daily RSI is bearish and pointing lower suggesting further weakness. All in all, EURUSD faces further downside pressure.

Good day traders!

Commodity remains on bullish side, which was confirmed by a new break to the highs on crude that came out of a fourth wave so fifth wave rise may continue towards our Fib levels placed near 63.00.

Crude oil, 1h

Cable is seen in a fourth wave which will ideally retest levels below 1.35 before it turns up again for a new bullish run into higher degree wave 5. A five wave rally and breach above 1.3612 level would suggest wave 5 to be in progress.

GBPUSD, 1h

The WTI is currently getting close to its December trend lines, and it might be either make it or break it. The POC zone ( Weekly camarilla pivot, D L4, 78.6) is sitting precisely between W H1 and W L1 levels, minor camarillas that usually provide a breakout direction on the instrument. 61.50-70 is the zone. If it rejects the zone, watch for a possible retest of 62.20 and 62.66. However, a drop below 61.50 should aim for 61.24, 60.24 and 60.36 if we see a bearish momentum and 4h close below W L3- 60.94.

• H3 - Weekly Camarilla Pivot (Weekly Interim Resistance)
• W H4 - Weekly Camarilla Pivot (Strong Weekly Resistance)
• D H4 - Daily Camarilla Pivot (Very Strong Daily Resistance)
• D L3 - Daily Camarilla Pivot (Daily Support)
• D L4 - Daily H4 Camarilla (Very Strong Daily Support)
• PPR - Progressive Polynomial Channel
• POC - Point Of Confluence (The zone where we expect price to react aka entry zone)

The euro has continued to drift lower against the greenback during the European trading session, falling to a new 2018 price-low at 1.1921. Broad based intraday strength in the U.S dollar index has been the main drive behind the EURUSD sharp decline. The pair currently trades right around lows of the session, with sellers likely to attempt a further push-lower towards the 1.1910 support region during the upcoming U.S session. The release of U.S Jobs data, and the U.S dollar index's next directional move will likely set the tone for remainder of Tuesday trading.

The EURUSD pair remains strongly bearish while trading below the key 1.1958 level, further losses towards 1.1910 and 1.1858 remain possible.

Should price-action recover above the 1.1958 level, upside resistance for the EURUSD pair is found at the 1.1989 and 1.2030 levels.

The British pound has fallen sharply against the U.S dollar during the European trading session, as buying in the greenback gathers pace. The GBPUSD pair has so far found interim support around the 1.3513 level, with price-action now consolidating around the 1.3530 region. Technical selling accelerated in the pair after a series of failed attempts towards the 1.3585 level, and a strong move-up in the U.S dollar index towards the 92.60 level. Sterling traders now await the release of the U.S JOLTS job opening report, and key Manufacturing data from the United Kingdom on Wednesday.

The GBPUSD pair is intraday bearish while trading below the 1.3550 technical level, further losses towards the 1.3500 and 1.3468 level seem likely.

Should price-action on the GBPUSD pair move above the 1.3550 level, buyers may push price back towards the 1.3585 and 1.3612 resistance points.

Earnings, Retail Sales and Inflation Eyed on Friday

US futures are trading a little flat once again ahead of the open on Tuesday, potentially a sign that markets have entered wait and see mode ahead of the start of earnings season.

Friday marks the unofficial start of earnings season and given the relative lack of notable economic events at the start of the week, it's not surprising to see little movement so far. Equity markets in the US are trading at record highs and with high expectations for earnings season already baked in, there may be an element of caution among investors who will be eagerly anticipating the first batch of results.

Of the economic reports being released this week, the two that stand out are inflation and retail sales figures for December, both of which provide important insight into the US economy. At a time when questions are being asked about whether the Federal Reserve should be pursuing such aggressive tightening, these numbers are very important in determining whether such a move is warranted or should be halted.

Nine Year Low in Unemployment Does Little to Lift the Euro

It's been a relatively quiet morning in Europe on the economic data side as well, with only low tier figures being released. Of those released, the one that stands out was the eurozone unemployment release for November, which fell to 8.7 – the lowest since January 2009 – in line with expectations. This further supports the view that significant progress is being made in the region, although as ever the benefits are not even with some countries in the periphery still seeing very high jobless numbers. Italy, for example, saw unemployment fall to 11%, its lowest since late 2012.
Eurozone Unemployment

The drop in unemployment did nothing to lift the euro, which continued to slide against the dollar, pound and yen. The euro had been on an impressive run up until the end of last week but it appears to have run out of steam just shy of September's highs against the greenback. It's off almost 1.5% from last week's highs but may find some support around 1.19 – 1.1850.

Bitcoin Struggling Again After Modest Late Monday Recovery

Bitcoin continues to be as volatile as ever. After suffering substantial losses on Monday – down close to 15% at one point – Bitcoin did make a modest recovery late in the day but that appears to have been short-lived. It's trading down around 2% currently on the day and I wonder whether the sell-off over the festive period has knocked speculators confidence in it to make the kind of recoveries we saw at times last year.

The inability to make these kinds of recoveries may just be temporary and a period of stability may be sufficient to draw traders back in but I wonder whether another correction may take place before that happens. Bitcoin may have gone through a large correction over the last month but even that only represented about half the huge rise between mid-November and mid-December. Should it survive a couple more weeks without any scares then I think we could see appetite for Bitcoin return.