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Strong rally in Chinese stocks is lifting Asian markets broadly higher today. Chinese president Xi Jinping is set to visit Italy, France and Monaco from March 21 to 26 this week. While there's no detail on the visits yet, it's believed that there could be signing of an agreement for Italy to join the Belt and Road infrastructure investment initiative. But while that might lift sentiments, the could look is still clouded by uncertainty in trade negotiations with the US. The highly anticipated Trump-Xi summit might only happen in April at the earliest, or in June alongside G20 summit in Japan, or might not happen at all.

Nevertheless, the currency markets are following strong risk appetite with Australian Dollar leading other commodity currencies higher. Yen and Dollar are the weakest ones. Sterling is also sluggish ahead of another meaning vote on Brexit deal, most likely on Tuesday. Technically, an immediate focus is 0.7121 minor resistance in AUD/USD. Break will suggest that recent decline from 0.7295 has completed and further rise would likely be seen back to 0.7206 resistance at least.

In other markets, Nikkei is currently up 0.67%. Hong Kong HSI is up 0.73%. China Shanghai SSE is up 1.26%. Singapore Strait Times is up 0.41%. Japan 10-year JGB yield is down -0.0037 at 0.039.

UK Hammond: Significant number of colleagues changed minds and backed the Brexit deal

The UK Parliament will have meaningful vote on Prime Minister Theresa May's Brexit deal for the third time this week. Ahead of that Chancellor of Exchequer Philip Hammond said a significant number of Conservatives have changed their mind last week to back the plan. And he expected more to come even though the government hasn't had enough numbers yet. And, "it is a work in progress".

Hammond said "What has happened since last Tuesday is that a significant number of colleagues, including some very prominent ones who have gone public, have changed their view on this and decided that the alternatives are so unpalatable to them that they on reflection think the prime minister's deal is the best way to deliver Brexit,"

Last Tuesday, the Commons voted 391-242 to reject May's "improved" deal. Back in January, the deal was voted down by 432-202.

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."

Looking ahead, three central banks to meet, two to release minutes

Three central banks will meet this week, including Fed, SNB and BoE. BoJ and RBA will release meeting minutes too. Fed is expected to keep federal funds rate unchanged at 2.25-2.50%. "Patience" will remain the central tone of the statement and other communications. Fed might also announce the plan to end the balance sheet roll-off and that could catch some attentions. But main focus will be on the new economic projections. Since late December, Fed officials have sung a chorus indicating they're in no hurry to lift interest rates unchanged. They finally have a chance to tell the markets the reasons for the change in stance with concrete numbers.

SNB is expected to keep the sight deposit rate at -0.75%. The three-month Libor target range should be held at -1.25% to -0.25% too. The central bank should also maintain that it's necessary to keep interest rate negative and pledge to intervene in the forex markets when needed. Such measures will keep the attractiveness of Swiss franc investments low and reduce upward pressure on the currency.

BoE is also expected to keep bank rate unchanged at 0.75%. The asset purchase target should be held at GBP 435B. BoE will also reiterate that the economic outlook will depend significantly on the nature of Brexit, hard or soft, abrupt or smooth. Also, it will be reiterated that the monetary path following Brexit will not be automatic and could be in either direction.

In addition to central bank activities, there are a number of economic data to watch too. Eurozone PMIs will give some hints on whether the slowdown in Eurozone has past its worst. UK CPI will also be watched but it's likely to be overshadowed by Brexit vote and BoE. Downward surprises in Australian house price and job data will add to the case of two RBA rate cut this year. Canada CPI and retails sales could also be market moving.

• Monday: Japan trade balance; Eurozone trade balance; Canada foreign securities purchases; US NAHB housing index
• Tuesday: RBA minutes, Australia house price index; Swiss trade balance; UK employment; German ZEW; US factory orders
• Wednesday: BoJ minutes; German PPI; UK CPI, PPI, CBI orders; FOMC rate decision
• Thursday: New Zealand GDP; Australia employment; SNB rate decision; BoE rate decision; Canada wholesale sales; US Philly Fed survey, jobless claims
• Friday: Japan PMI manufacturing, national CPI core; Eurozone PMIs, current account; Canada CPI, retail sales; US PMIs, existing home sales, wholesale inventories

AUD/USD Daily Outlook

Daily Pivots: (S1) 0.7066; (P) 0.7082; (R1) 0.7102; More...

AUD/USD rises strongly today and focus is now on 0.7121 minor resistance. Firm break there will argue that decline from 0.7295 has completed at 0.7003. In that case, further rise should be seen to 0.7206 resistance to confirm. More importantly, in that case, corrective three wave structure of the fall fro 0.7296 to 0.7003 would suggest that rise from 0.6722 low is extending through 0.7295. On the downside, though, break of 0.7003 will extend the fall from 0.7295 to 61.8% retracement of 0.6722 to 0.7295 at 0.6941 and below.

In the bigger picture, as long as 0.7393 resistance holds, we'd treat fall from 0.8135 as resuming long term down trend from 1.1079 (2011 high). Decisive break of 0.6826 (2016 low) will confirm this bearish view and resume the down trend to 0.6008 (2008 low). However, firm break of 0.7393 will argue that fall from 0.8135 has completed. And corrective pattern from 0.6826 has started the third leg, targeting 0.8135 again.

Economic Indicators Update

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."

Full release here.

The UK Parliament will have meaningful vote on Prime Minister Theresa May's Brexit deal for the third time this week. Ahead of that Chancellor of Exchequer Philip Hammond said a significant number of Conservatives have changed their mind last week to back the plan. And he expected more to come even though the government hasn't had enough numbers yet. And, "it is a work in progress".

Hammond said "What has happened since last Tuesday is that a significant number of colleagues, including some very prominent ones who have gone public, have changed their view on this and decided that the alternatives are so unpalatable to them that they on reflection think the prime minister's deal is the best way to deliver Brexit."

Last Tuesday, the Commons voted 391-242 to reject May's "improved" deal. Back in January, the deal was voted down by 432-202.

STOCKS

Indian indices, the Sensex and Nifty 50 remains strong and continue to outperform their global peers. They are likely to move further higher in the coming days. On the global front, Nikkei and DAX are bullish and can move higher in the near term. Dow can also move up if it can hold on to last week's gains. Shanghai can consolidate sideways for some time within its overall uptrend

Dow (25,848, +138.93, +0.54%), on Friday has closed above the 21-day moving average(25,800) which was capping the upside for some time. If it manages to sustain above 25,800, an upmove to 26,100 and 26,200 can be seen in the near term. The index will come under pressure for a fall to 25,200 and 25,100 only if it declines below the support level of 25,685

DAX (11,685.69 +98.22, +0.85%) has broken above 11,650 as expected and keeps the bullish outlook intact for a test of 11,800.

Nikkei (21,579.66, +128.81, +0.60%) has been holding well above its 100-day moving average support level of 21,286. The index can target 22,000 in the coming days on a strong break above 21,600

Shanghai (3,049.82, +28.07, +0.93%) can consolidate between 2,950 and 3,100.

Sensex (38,024.32, +269.43, +0.71%) and Nifty 50 (11,426.85, +83.60, +0.74%) have closed on a strong note last week. The indices remain bullish. Sensex has supports at 37,875 and 37,620 and Nifty has supports at 11,320 and 11,225. While above these supports, Sensex can target 38,500 and 39,000 and Nifty can target 11,600 and 11,750 in the coming weeks.

COMMODITIES

Gold, Silver and Copper looks mixed and may consolidate in the near term before a clear trend emerges. Oil might dip in the near-term and may reverse higher thereafter.

Gold (1299) can dip to 1290 in the near-term and may remain range bound between 1290 and 1310 for some time.

Silver (15.27) looks mixed with equal chances of either rising to test the resistance at 15.4 or declining to test the support at 15.10 from current levels.

Copper (2.91) has been consolidating sideways between 2.88 and 2.95 over the last couple of week. It is likely to retain this range for some more time. The bias is bullish for the prices to breakout above 2.95 and target 2.98 and 3.0 in the coming weeks.

WTI (58.25) sustains above 58 but seems to be lacking fresh follow-through buyers. A dip to 57-56.85 looks likely in the near term before we see a rally to 60.

Brent (67) failed to breach 68 last week and fell sharply on Friday to test 66. The broader 64-68 sideways range remains intact. Within this range, Brent may remain stuck between 66 and 68 in the near term. We see high chances of Brent breaking above 68 and target 70 in the coming days.

FOREX

Dollar-Index (96.52) could bounce from 96.25 and gradually rise towards 97.00 and higher in the near term. While 96.25 holds, Dollar Index looks bullish.

As mentioned on Friday, Euro (1.1332) is likely to test immediate resistance near 1.1350 or higher at 1.14 from where a fall is likely to be seen in the coming sessions towards 1.1250-1.1200. Medium term looks bearish.

Euro-Yen (126.49) has been stable, trading just below important resistance near 126.80. A corrective dip from there looks likely.

Dollar Yen (111.61) has immediate resistance near 112.50 and could be headed higher in the next few sessions. A short corrective dip from there could be expected.

Aussie (0.7096) could test 21-D MA near 0.7123 which if holds could push it back to 0.7050 in the near term. A break above 0.7123 could see an extension towards 0.7150-0.72 on the upside.

Pound (1.3289) is holding trading within 1.32-1.34 region and could possibly spend some more time within this region. In the medium term a gradual fall towards 1.3050 is possible if the Pound breaks below 1.32. Note 1.34 is an important resistance that may hold for now.

USDCNY (6.7139) has trend support near 6.70 as seen on the 3-day chart and while that holds, the pair is likely to move up towards 6.74 or higher.

Dollar-Rupee (69.10) is likely to come down further today towards our mentioned levels of 68.90/80. Near term looks strong for the Rupee.

INTEREST RATES

The US yields have risen. The 2YR (2.45%), 5Yr (2.40%), 10Yr (2.60%) and the 30YR (3.02%) have risen by 1bps. The bounce if continues in the near term could take the yields higher as there is enough room on the upside towards 2.67% (for 10Yr ), 3.10% (for 30YR), 2.5% (for 5YR).

The US-JGB 10YR (2.63%) is trading near support levels and could bounce back in the near term targeting higher levels of 2.70%. Near term looks bullish and while the spread rises, it could pull up Dollar-Yen too in the near term.

The 10YR GOI (7.5024%) closed at lower levels on Friday contrary to our expectation of a rise towards 7.60%. While below 7.54%, lower levels of 7.48/45% come into the picture again. While the yield looks bearish towards 7.45%, Rupee could see some more strength in the near term.

Key Highlights

• The Euro started a solid rebound and traded above 1.1300 against the US Dollar.
• EUR/USD broke two bearish trend lines near 1.1280 on the 4-hours chart.
• The US Industrial Production increased 0.1% in Feb 2019 (MoM), less than the +0.4% forecast.
• The Euro Zone Trade Balance for Jan 2019 will be released today, which could post a surplus of €13.2B, down from €15.6B.

EURUSD Technical Analysis

After a major decline, the Euro found support near the 1.1175 level against the US Dollar. Later, the EUR/USD pair recovered nicely and moved above the 1.1250 and 1.1300 resistance levels.

Looking at the 4-hours chart, the pair popped higher above the 1.1280 pivot level and even cleared the 50% Fib retracement level of the last decline from the 1.1419 high to 1.1175 low.

More importantly, the pair broke two bearish trend lines near 1.1280 on the same chart. Finally, there were a couple of spikes above the 1.1340 level and the 61.8% Fib retracement level of the last decline from the 1.1419 high to 1.1175 low.

However, the pair struggled to clear the 200 simple moving average (green, 4-hours) and started consolidating gains. On the downside, an initial support is near the 1.1280 area (the previous resistance). If there are more losses, the pair may revisit the 1.1250 support level.

On the upside, a proper close above the 1.1350 level and the 200 SMA could open the doors for an extended rebound towards 1.1400 and 1.1420. Conversely, if buyers fail to keep the pair above 1.1280 or 1.1250, the Euro is likely to move back in a bearish zone.

Fundamentally, the US Industrial Production report for Feb 2019 was released this past Friday by the Board of Governors of the Federal Reserve. The market was looking for a 0.4% rise in the production in Feb 2019, compared with the previous month (MoM).

The result was lower than the forecast, as the US Industrial Production increased 0.1%. On the positive note, the last reading was revised up from -0.6% to -0.4%.

The report added that:

Manufacturing production fell 0.4 percent in February for its second consecutive monthly decline. The index for utilities rose 3.7 percent, while the index for mining moved up 0.3 percent. At 109.7 percent of its 2012 average, total industrial production was 3.5 percent higher in February than it was a year earlier.

Overall, both EUR/USD and GBP/USD recovered nicely this past week, but they might correct in the short term before extending upsides.

Economic Releases to Watch Today

• Euro Zone Trade Balance Jan 2019 – Forecast €13.2B versus €15.6B previous.
• US NAHB Housing Market Index March 2019 – Forecast 63.0, versus 62.0 previous.

Wall Street rises but US30 index lags

Wall Street indices climbed Friday, though the US30 index continued to be pressured by Boeing shares. The Nas100 index had its best week since November. European shares advanced after all the UK parliamentary Brexit votes had been completed.

NAS100USD Daily Chart

The Nas100 index posted its biggest weekly gain since the end of November last week, climbing to the highest since October 17 on Friday

The index closed above the 78.6% Fibonacci retracement of the October-December drop at 7,295.7 on Friday

The US data calendar is almost blank today, with only the NAHB housing market index scheduled. That’s seen rising to 63 in March from 62 last month.

DE30EUR Daily Chart

The Germany30 index touched a five-month high on Friday once all the Brexit parliamentary votes had been concluded in the UK

The index is rising toward the 200-day moving average at 11,790, which hasn’t been breached since August 1. The 55-day moving average is above the 100-day average for the first time since August 15

The Euro-zone trade balance is expected to show a narrower surplus of EUR13.2 billion on a seasonally-adjusted basis in January, according to the latest surveys. December’s surplus was EUR15.6 billion.

UK100GBP Daily Chart

The UK100 index rose to its highest since February 21 on Friday, encouraged after the 3-days of Brexit votes had been concluded

The index is testing the 200-day moving average at 7,250, which has been left untouched since October 4

Rightmove UK house price index fell 0.8% y/y in March, according to data released this morning. They were up 0.2% y/y in February.

EURUSD threatens further upside pressure with eyes on 1.1380 zone in the new week. Support comes in at the 1.1300 where a break will aim at the 1.1250 level. A break below here will target the 1.1200 level. Further down, support lies at the 1.1150. On the upside, resistance resides at 1.1350 level with a break through there opening the door for further upside towards the 1.1400 level. Further up, resistance comes in at the 1.1450 level where a violation will expose the 1.1500 level. Its daily RSI is bullish and pointing higher suggesting further strength. All in all, EURUSD continues to threaten further upside pressure.

GOLD threatening further upside pressure nearer term as it closed higher the past week. The pair looks to move higher towards the 1,310.00 resistance zone in the new week. Further out, resistance resides at the 1,320.00 level where a break will aim at the 1,330.00 level. A turn above there will expose the 1,340.00 level. Further out, resistance stands at the 1,350.00 level. Its daily RSI is pointing higher suggesting further strength. On the downside, support comes in at the 1,290.00 level where a break will turn attention to the 1,280.00 level. Further down, a cut through here will open the door for a move lower towards the 1,270.00 level. Below here if seen could trigger further downside pressure targeting the 1,260.00 level. All in all, GOLD looks to move further higher in the days ahead.

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As suggested in the CFTC Commitments of Traders report in the week ended March 12, NET LENGTH in USD Index gained as increase in longs outweighed that of shorts. With the exception of NZD, all major currencies stayed in NET SHORT positions. Speculative longs on USD index gained +3 358 contracts while shorts added +1 998 , raising NET LENGTH, by +1 360 contracts, to 35 074.

Concerning EUR and GBP futures, speculative long positions for the former fell 4 065 contracts while shorts plunged -6 486 contracts, trimming NET SHORT to 75 745 contracts for the week. NET SHORT for GBP futures gained +1 767 contracts to 36 696. Speculative longs were down -4 693 contracts while speculative shorts fell -2 929 contracts for the week. British pound gained last week as the parliament voted for extension of Article 50, the legal procedure for the UK to leave the EU. Gains were trimmed towards the end of the week as a second referendum was ruled out for now.

On safe-haven currencies, Net SHORT for CHF futures dropped -799 contracts to 23 305. NET SHORT for JPY futures gained +7 475 contracts to 58 781 during the week. Bets fell on both sides.

On commodity currencies . NET SHORT for AUD futures rose +2 958 contracts to 43 699. Speculative long positions gained +2 843 contracts while shorts rose +5 801 contracts. NET LENGTH for NZD futures added +3 176 contracts to 4 597, amidst gains in speculative long positions and drops in shorts. NET SHORT for CAD futures climbed +609 contracts to 41 053. Bets increased in both sides.