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The Canadian dollar has started the week quietly. Early in the North American session, USD/CAD is trading at 1.3321, down 0.12% on the day. On the release front, it’s a light day for fundamentals, so traders can expected an uneventful day from the pair. Canadian foreign securities purchases sparkled, with a reading of C$28.40 billion, well above the forecast of C$15.03 billion. This was the strongest gain in almost two years. The U.S. will release a minor housing report. On Tuesday, Canada releases its annual budget.

Is the Canadian economy heading into a recession? Despite some strong employment numbers, there are worrying signs. The economy recorded a weak 0.4% gain in Q4 on an annualized basis and has been listless early in 2019. David Wolf, a former senior official at BoC, has projected that the Canadian dollar could sink to its record low of 1.60 ($.62 cents U.S.). Weak oil prices and the global trade war have hurt the Canadian economy and dampened the critical export sector.

With the U.S-China trade war showing signs of easing, there were expectations that President Trump and Chinese President Xi might hold a summit in late March. However, it was reported last week that the two leaders will not meet before April. President Trump has said that there will be news in the next 3-4 weeks, which has raised hopes that China and the U.S. will hammer out an agreement. If there are positive developments in the trade war, risk appetite will likely climb, which would be good news for the Canadian dollar.

Daily Pivots: (S1) 111.23; (P) 111.59; (R1) 111.82; More...

Consolidation from 112.13 is still in progress and intraday bias remains neutral first. As long as 110.35 support hold, near term outlook remains bullish. On the upside, break of 112.13 will resume the rally from 104.69 to 114.54 resistance next. However, firm break of 110.35 should confirm near term reversal and turn outlook bearish for 108.49 support and below.

In the bigger picture, strong rebound from 104.69 argues that decline from 118.65 (2016 high) has completed with three waves down to 104.69, after failing 104.62. More importantly, the rise from 98.97 (2016 low) could be resuming. Decisive break of 114.54 resistance will add more credence to this bullish case and target 118.65. This will now be the favored case as long as 110.35 support holds. However, firm break of 110.35 will mix up the medium term outlook again and turn focus back to 104.69 low.

Daily Pivots: (S1) 1.0004; (P) 1.0028; (R1) 1.0047; More....

USD/CHF's fall from 1.0124 extends today and intraday bias stays on the downside for 0.9936 support. Decisive break there will carry larger bearish implication. On the upside, though, break of 1.0052 minor resistance will turn bias back to the upside for retesting 1.0124 instead.

In the bigger picture, USD/CHF drew strong support from medium term trend line and rebounded. That suggests rise from 0.9186 is still in progress. Further break of 1.0128 will confirm up trend resumption and target 1.0342 key resistance. Nevertheless, break of 0.9926 support will be the first signal of medium term reversal and bring another test on the trend line.

Daily Pivots: (S1) 1.1301; (P) 1.1323; (R1) 1.1346; More.....

EUR/USD's rebound from 1.1176 extends higher today and further rise cannot be ruled out. But still, such rise is seen as a corrective move. Upside should be limited below 1.1419 resistance to bring down trend resumption. On the downside, below 1.1294 minor support will turn bias to the downside for 1.1176 low first. Break of 1.1176 will target 100% projection of 1.1814 to 1.1215 from 1.1569 at 1.0970 next.

In the bigger picture, down trend from 1.2555 medium term top is still in progress. Bearishness is affirmed by sustained trading below falling 55 week EMA. 61.8% retracement of 1.0339 (2017 low) to 1.2555 at 1.1186 is met. Sustained break there will pave the way to retest 1.0339. On the upside, break of 1.1569 resistance will now indicate completion of such down trend and turn medium term outlook bullish.

Daily Pivots: (S1) 1.3231; (P) 1.3265; (R1) 1.3328; More....

GBP/USD is staying in consolidation below 1.3381 temporary top and intraday bias remains neutral. Further rise is expected as long as 1.2960 support holds. On the upside, firm break of 1.3381 will target 61.8% retracement of 1.4376 to 1.2391 at 1.3618 next. However, on the downside, firm break of 1.2960 will indicate that rebound from 1.2391 has completed earlier than expected. Deeper fall would then be seen to 1.2773 support for confirmation.

In the bigger picture, medium term decline from 1.4376 (2018 high) should have completed at 1.2391. Rise from 1.2391 is now seen as the third leg of the corrective pattern from 1.1946 (2016 low). Further rise could be seen through 1.4376 in medium term. On the downside, though, break of 1.2773 support will dampen this view. Focus will be turned back to 1.2391 low and break will resume the fall from 1.4376 to 1.1946.

Sterling is trading as the weakest one for today so far after suffering some selling in European session. No support is seen for the Pound even though high profile Brexiteer Jacob Rees-Mogg indicated that he might support Prime Minister Theresa May's Brexit deal. However, loss is limited in Sterling as the overall picture remains unclear. For now, it's uncertain whether the government will pull tomorrow's Brexit meaningful vote due to far insufficient support.

Staying in the currency markets, Australian Dollar was lifted earlier today by strong rally in Chinese stocks. But it lost some momentum after European markets turned mixed. Also, the Aussie will facing tests from RBA minutes as well as house price data in the upcoming session. Euro picked up some strengthen even though Bundesbank warned of subdued German growth in Q1. Rise in German yield is unpinning Euro for now. Overall, the markets lack clear direction in early US session.

In Europe, FTSE is up 0.64%. DAX is down -0.30%. CAC is flat. German 10-year yield is up 0.0094 at 0.095, getting close to 0.1 handle. Earlier in Asia, Nikkei rose 0.62%. Hong Kong HSI rose 1.37%. China Shanghai SSE rose 2.47%. Singapore Strait Times rose 0.40%. Japan 10-year JGB yield rose 0.002 to -0.035.

On the data front, Canada international securities transactions rose CAD 28.4B in January. Eurozone trade surplus widened to EUR 17.0B in January, missed expectation of EUR 17.2B. UK Rightmove house price rose 0.4% mom in March. Japan industrial production was finalized at -3.4% mom in January, trade surplus widened slightly to JPY 0.12T in February.

Bundesbank: German growth subdued in Q1 as consumption offset by weak manufacturing

Bundesbank said in the monthly report that German economic growth remained subdued in Q1. The main reasons include weak industrial production, falling auto exports and deteriorating manufacturing sentiment. Manufacturing sector would drag down overall economic performance for the third straight quarter.

On the other hand, construction and private consumption should provide support to the economy. Employment also continues to rise despite slowdown. Bundesbank added that private consumption could pickup significantly as signaled by strong increase in retail sales.

German FM Scholz : Some richer countries only think of their own interest

German Finance Minister Olaf Scholz warned in at the World Policy Forum in Berlin that trade conflicts are damaging the world. Without naming any country, he singled out "richer countries" who only think of their own interest. At the same time, he also urged Europe to have one voice to have more bargaining power.

Scholz said "trade conflicts, as we have seen over the last months – especially between richer countries only thinking of their own interest – are damaging the world economy". He added that "trade policy has been an EU-level responsibility for a long time". And, "it is obvious that we have much more bargaining power if we speak with one European voice... only together we are able to set and enforce standards of fair trade."

EU to seek China agreement to open up market in upcoming summit

Reuters reported that EU is seeking China's agreement to open up its market by summer 2019. An EU drafted six-page joint communique obtained reads China and the EU will "agree by summer 2019 on a set of priority market access barriers and requirements facing their operators." It's intended to be the deliverable of the EU-China summit on April 9 in Brussels. Chinese Premier Li Keqian is expected to be there, meeting European Commission President Jean-Claude Juncker and European Council President Donald Tusk.

While there is no other detail reported, we believed it's released to the proposed 10 actions by the European Commission on relations with China release last week. The proposal will be discussed and endorsed at the European Council meeting this week on March 21. There, EU described China as a "cooperation partner" and "negotiating partner" as well as "systemic rival promoting alternative models of governance." Some important actions focus on issues like subsidies and forced technology transfers, reciprocity and open up procurement opportunities in China.

Brexiteer Rees-Mogg hints he might back May's deal, as it's better than no Brexit

One of the most influential Brexiteer hinted today that the might back Prime Minister Theresa May's Brexit deal because a bad deal is better than no Brexit. Jacob Rees-Mogg, chairman of the European Research Group told LBC Radio that "no deal is better than a bad deal but a bad deal is better than remaining in the European Union in the hierarchy of deals."

Rees-Mogg warned that "a two-year extension is basically remaining in the European Union." But he also noted: "The question people like me will ultimately have to answer is: can we get to no-deal instead? If we can get to no-deal instead, that is a better option… but I am concerned the prime minister is determined to stop a no-deal."

Separately, Foreign Minister Jeremy Hunt said there were "cautious signs of encourage" regarding May's deal. And the government would "hope" to have another meaningful vote tomorrow. But he emphasized "we need to be comfortable that we'll have the numbers". Hunt of said "the risk of no-deal, at least as far as the UK parliament is concerned, has receded somewhat but the risk of Brexit paralysis has not."

BCC downgrades UK growth forecasts on Brexit and global slowdown

The British Chambers of Commerce (BCC) has downgraded UK growth forecast on "weaker outlook for business investment and trade amid continued Brexit uncertainty and slower expected global economic growth". For 2019, growth forecast was downgraded from 1.3% to 1.2%. For 2020, growth forecasts was downgraded from 1.5% to 1.3%. in 2021, growth is projected to pick up slightly to 1.4%.

Also, BCC noted that business investment is projected to contract by -1.0% in 2019. And that would be the weakest outturn in a decade since the financial crisis in 2009. BCC blamed that "ongoing uncertainty over the UK's future relationship with the EU is expected to continue to weigh on investment intentions." And, "diversion of resources to prepare for no deal and the high upfront cost of doing business in the UK is also projected to limit the extent to which investment activity will bounce back over the near term."

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.3231; (P) 1.3265; (R1) 1.3328; More....

GBP/USD is staying in consolidation below 1.3381 temporary top and intraday bias remains neutral. Further rise is expected as long as 1.2960 support holds. On the upside, firm break of 1.3381 will target 61.8% retracement of 1.4376 to 1.2391 at 1.3618 next. However, on the downside, firm break of 1.2960 will indicate that rebound from 1.2391 has completed earlier than expected. Deeper fall would then be seen to 1.2773 support for confirmation.

In the bigger picture, medium term decline from 1.4376 (2018 high) should have completed at 1.2391. Rise from 1.2391 is now seen as the third leg of the corrective pattern from 1.1946 (2016 low). Further rise could be seen through 1.4376 in medium term. On the downside, though, break of 1.2773 support will dampen this view. Focus will be turned back to 1.2391 low and break will resume the fall from 1.4376 to 1.1946.

Economic Indicators Update

German Finance Minister Olaf Scholz warned in at the World Policy Forum in Berlin that trade conflicts are damaging the world. Without naming any country, he singled out "richer countries" who only think of their own interest. At the same time, he also urged Europe to have one voice to have more bargaining power.

Scholz said "trade conflicts, as we have seen over the last months – especially between richer countries only thinking of their own interest – are damaging the world economy". He added that "trade policy has been an EU-level responsibility for a long time". And, "it is obvious that we have much more bargaining power if we speak with one European voice... only together we are able to set and enforce standards of fair trade."

The US 30 index recorded a bullish signal in the previous week, completing a golden cross within the 50- and the 200-simple moving averages (SMAs) in the daily timeframe. Today, though, the index is on the backfoot and the technical indicators suggest that the market could ease a little bit in the short-term. The stochastic oscillator is ready for a bearish cross in the overbought zone, while the MACD remains below trigger line.

In case of a correction lower, preliminary support may be found near the 25,220 level, which stands near the crossroads of the 50- and 200-day SMAs as well as around the 23.6% Fibonacci retracement level of the upleg from 26,596 to 26,240 around 25,091. A clear break below this area would turn the bias back to neutral in the short-term and could set the stage for a rest around the 38.2% Fibonacci of 24,426.

On the other hand, if the bulls continue to have the control, immediate resistance could come around the three-month high of 26,240, where it topped on February 25. If buyers pierce above that, the next obstacle may be the all-time high of 26,960.

In the short-term, the indicators point to a possible bearish retracement, however, the index is still creating higher highs and higher lows over the last couple of months, which augurs well for the medium-term.

The DAX has started the week with losses. In the Monday session, the DAX is at 11,660, down 0.21% on the day. In economic news, there is only one event on the schedule. The eurozone trade balance climbed to EUR 17.0 billion, close to the forecast of EUR 17.2 billion. This marked a 9-month high. On Tuesday, Germany releases ZEW Economic Sentiment, which is expected to remain mired in negative territory.

There was a dramatic development in the European banking sector, as Deutsche Bank confirmed that it is conducting merger talks with another German bank, Commerzbank. The new entity will be the third largest bank in the eurozone, according to assets. Interestingly, the head of Deutsche Bank wrote a note to staff on Sunday, cautioning that a merger was not a done deal. Still, investors have given a thumbs-up to the announcement, with Deutsche Bank shares soaring 5.0% on Monday.

The Brexit drama is at fever pitch, after parliament voted on Brexit three times last week. As expected, lawmakers voted to ask the European Union for an extension on Article 50. Britain is scheduled to depart the E.U. on March 29, so an extension would give the May government some breathing room. However, the uncertainty surrounding Brexit is far from over. It’s unclear how long an extension the E.U. would be willing to grant, although senior E.U officials have said that a year or more would be acceptable. The E.U. will have to reach a consensus from all 27 members, each of whom must vote in favor of an extension to Article 50. Parliament remains deeply divided over Brexit, and Prime Minister May, though badly shaken, hasn’t given up on her withdrawal deal. With another parliamentary vote expected next week, traders should be prepared for more volatility from European stock markets.

Equity markets are rising after the recovery of demand for risky assets. S&P 500 closed last week at the highs since October, finally convincing everyone of overcoming an important resistance at 2800 points. Shanghai blue-chip index China A50 rose 2.7% on Monday, closing at the highs area since April last year.

As for technical analysis, we are witnessing an almost perfect picture for future stock markets growth. The markets decline during October-December was a "Trump Rally" correction. This correction brought back the attractiveness of those stocks that were drivers of growth in previous years, but then looked a bit overvalued.

The subsequent pullback since the end of last year was sharp, showing overbought levels on the daily charts. In early March, this overbought background turned into a decline, which, in turn, was also bought out. The first bell that the markets did not seriously consider the March decline, was that the markets quickly turned to growth after touching the 200-day moving average.

The second confirmation was the consolidation above 2800 – an important resistance level, from where the S&P 500 turned to decline four times since October.

It is also worth noting that the growth of US stock indices is still far from exhaustion, as the RSI remains in neutral territory.

The S&P 500 has overcome previous important levels of consolidations, and now it can be on the direct path to updating its highs at 2940, which is 4% higher than current levels.

The Fed, the ECB and the PBC rhetoric softening can be noted as the main market drivers. As in 2016, they managed to stop panic sales in the markets by mitigating rhetoric. Later this week, the next Fed meeting will take place, and markets are waiting for the soft rhetoric confirmation of the most important world central bankers, which additionally can breathe life into the demand in the stock markets.