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GBPUSD posted a sharp bullish rally earlier today almost challenging the 1.3300 handle, however, the price quickly erased those gains and returned back around 1.3200. In the previous day, cable added 230 pips gains, driving the price above the 23.6% Fibonacci retracement level of the upleg from 1.2390 to 1.3350, around 1.3120.

Technically, the RSI continues to flatten around the neutral threshold of 50, while the MACD is gaining some steam approaching the trigger line, both signaling that a bullish to neutral move is likely to persist in the short term. Yet the upward-sloping 20- and 40-day simple moving averages (SMAs) suggest that the recent uptrend is not near to its end.

The 1.3300 – 1.3350 area could provide immediate resistance in case bullish action stretches further above today’s high. If the market manages to rally above this point and more importantly clear the peak at 1.3350, resistance could be next found near 1.3475, registered on June 2018. Another successful upside break could bring 1.3600 into view, identified by the highs on May 2018.

Otherwise, the pair could slip below the 23.6% Fibonacci to challenge the 20- and then the 40-SMAs currently around 1.3095 and 1.3045 respectively, ahead of the 38.2% Fibonacci of 1.2980. Under these lines, immediate support is coming from the 1.2960 barrier, taken from the latest lows, while if this fails to hold too, traders could then look for support at the 50.0% Fibonacci of 1.2870.

Concluding, GBPUSD has been trading in an upside tendency over the last two-and-a-half months, following the bounce off the 21-month low, while looking at the long-term picture, the price seems to be neutral, creating a trading range within 1.2475 – 1.3300.

EURUSD has been outperforming in the past three days, after the strong rebound on the 21-month low of 1.1175 on March 7. Currently, the price has been developing within a downward sloping channel in the short-term following the penetration of the medium-term sideways channel. Technically, the RSI indicator is confirming the recent upside movement, while the stochastics posted a bullish crossover within %K and %D lines in the oversold zone, suggesting a positive correction.

If the price continues the pullback on the 21-month trough, immediate minor resistance is coming from the 1.1270 barrier, which was touched earlier in the morning again. A break above this level, could send prices towards the 20-day simple moving average (SMA) currently at 1.1310 before moving until the 23.6% Fibonacci retracement level of the downleg from 1.1815 to 1.1175, near 1.1325. Slightly above this hurdle, the price may hit the 40-SMA, which stands around 1.1340 and then could move towards the descending trend line near 1.1370.

On the other hand, if the price fails to jump above 1.1270, it could hit the 1.1175 bottom again and a violation of this obstacle could push the pair even lower, below the channel, challenging 1.1115, identified by the lows on June 2017. More downside pressures could open the door for the 1.0830 level, taken from the low on May 2017.

Summarizing, EURUSD has posted an aggressive bearish rally in the preceding week, switching the neutral outlook to negative, creating lower lows and lower highs in the near term.

• Pound extends yesterday’s surge as May secures ‘legally binding’ changes to Brexit deal
• All eyes now on British Parliament amid doubts whether EU’s legal assurances will be enough
• Equities rally and yen retreats as risk appetite improves and on hopes of more stimulus in China

Sterling back above $1.32 on hopes May can win MPs backing with revised deal

The British pound was the star performer for a second day on Tuesday as UK prime minister, Theresa May, managed to win legally binding assurances from the European Union that the Irish backstop would be temporary. There were doubts, however, about whether the changes would be enough to convince rebel Conservative MPs to back May’s deal as it was unclear how easy it would be for the UK to pull out of the backstop unilaterally, despite May’s assurances.

This puts the focus on the UK attorney general’s legal advice on the updated deal, which will be published before the vote. If the small Northern Irish party, the DUP, who are propping up May’s minority government, decide to back the deal, then it’s quite likely eurosceptic Conservatives will also vote in favour of the deal. Lawmakers are expected to vote on the deal around 1900 GMT.

In the meantime, sterling was edging higher by 0.6% at $1.3235, while the euro was struggling near 22-month lows at 0.8510 pounds.

The euro fared slightly better versus the greenback, benefiting from the upbeat Brexit headlines as well as from the improved risk sentiment, even though the near-term outlook for the Eurozone economy remains negative.

Yen pulls back, stocks rally as markets in risk-on mode

The safe-haven yen was broadly weaker on Tuesday as markets turned buoyant from the positive developments in the Brexit progress and US-China trade discussions. Talks between the two countries are continuing, with Chinese Vice Premier Liu He reportedly agreeing with US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin on the next steps in the negotiations.

The yen was down the most versus the pound but was only marginally lower against the dollar, at 111.37 yen per dollar. Those gains weren’t enough to push the dollar index to positive territory given the significant losses against the pound and the euro, with the index last trading 0.2% lower at 96.99.

Also contributing to the risk-on mood was a pledge by China’s central bank over the weekend to further boost lending and reduce borrowing costs. Chinese stocks closed sharply higher for a second straight day, while the major European indices opened in the green. US e-mini futures pointed to a positive start for Tuesday following strong gains overnight on Wall Street.

UK GDP and US inflation data coming up

The pound may get a further boost from a slew of releases out of the UK at 0930 GMT, including monthly GDP growth. The British economy likely returned to growth in January after an unexpected contraction in December. However, a negative surprise would probably have little impact on sterling if British MP’s approve May’s revised deal.

In the US, investors will be watching the latest inflation numbers at 12:30 GMT. The consumer price index is expected to have held steady at a muted 1.6% in February, which would underscore the Fed’s wait-and-see approach.

Cable remains bid in early European trading on Tuesday and holding under new two-week high at 1.3288, posted in early Asian session in extension of Monday's 1.6% advance, the biggest one-day gains since 1 Nov. The pound was boosted by renewed optimism on potential Brexit deal approval after PM May agreed with European commission on some changes to her plan, ahead of vote in the parliament later today. UK PM May managed to get some concessions from the EU on Irish backstop which was the main obstacle in the latest negotiation and now everything will be in the hands of UK parliament. European Commission Chief Juncker said that this is the last chance and deal will be reached or there will be no Brexit. Volatility risk is at the highest since Brexit vote as uncertainty whether the plan will be approved or will be voted down rises. Two scenarios are circulating in the market, the first one, where May will manage to reverse 15 Jan vote defeat and the second, on repeated parliament's rejection of the plan. The first scenario is expected to stabilize the situation and lead towards smooth final divorce on 29 Mar. In case the plan does not pass, the parliament will vote on amendments on Wednesday and will likely rule-out Brexit without deal. The next step will be another vote on Brexit delay on Thursday, which would open scenario for a second Brexit referendum or a general election. Daily studies are gaining bullish momentum, with indicators pointing higher and MA's in positive setup, being supportive for further advance, as Monday's bullish outside day, underpins the action. Fresh bulls probed again through the base of thick falling weekly cloud, following repeated rejection in past two weeks, with fresh bullish signal expected on eventual break and close within the cloud. Bulls eye 2019 high at 1.3349 (27 Feb), violation of which would expose barrier at 1.3386 (50% retracement of 1.4376/1.2397 fall). Broken 10SMA (1.3181) offers initial support, ahead of rising 20SMA (1.3090) with 200SMA and daily cloud continuing to underpim. A batch of UK economic data, due in a while, would generate fresh signals, as traders eye monthly GDP (0.2% f/c vs -.04% prev), Manufacturing Production (Jan 0.2% f/c vs -0.7% prev) and UK Jan Trade Balance release, to get more clues about the strength of the UK economy.

Res: 1.3248, 1.3288, 1.3362, 1.3386
Sup: 1.3181, 1.3134, 1.3090, 1.3055

XAUUSD (1296.27): Gold posted modest declines on Monday following Friday’s bullish close. However, price action managed to recover these declines during the early trading session today. The reversal came after gold briefly tested the support at 1290.50 level. On the 4-hour chart, the Stochastics is showing that momentum is building up. This could potentially keep gold biased to the upside. In the short term, the previous highs at 1300.80 need to be breached to confirm the continuation to the upside. The next main target is at the 1305 level, followed by a correction toward the 1319 – 1322 region.

USDJPY (111.40): The USDJPY posted a modest correction after prices touched lows of 110.87. However, with price closing bullish on the day, a follow-through from here could confirm the upside. The USDJPY will now need to break past the previous highs of 112.13. This will potentially keep the bullish momentum intact, pushing the USDJPY to test the resistance area of 112.50. However, failure to maintain the gains could come at a risk of the USDJPY breaking lower with the support at 109.74 likely to be the downside target.

EURUSD (1.1256): The euro currency posted gains for the second daily session after previously falling to lows of 1.1175. The common currency is posting a hidden bearish divergence near the resistance level that is being tested at 1.1256. A reversal to the downside could push the euro lower to 1.1212. A rebound off this level will confirm that the bottom is in place. To the upside, a breakout above 1.1256 will confirm further gains to 1.1309 – 1.1327 resistance area

The US dollar extended declines for a second daily session. Economic data on the day was relatively sparse. The euro traded subdued while gold prices weakened on the day.

Germany

German industrial production figures showed a disappointing print. Industrial production fell 0.8% on the month in January 2019. This was well below the estimates of a 0.5% increase and down from December's 0.8% expansion. Most of the declines were attributed to a slump in the automobile industry.

NY Trading Session

The NY trading session saw U.S. retail sales recovering from the decline in December. Headline retail sales increased 0.2% on the month against estimates of a flat print. Core retail sales rose 0.9%, beating estimates of a 0.4% increase. However, December's core retail sales were revised lower to show a 2.1% decline. Meanwhile, headline retail sales for December underwent a revision to 1.6% declines.

Today's Schedule

The economic data today kicks off with the European session starting with the UK's GDP figures. Economists forecast that the GDP will advance 0.2% in January. The data comes following a 0.4% decline in the previous period.

Besides the GDP data, the UK's manufacturing, industrial and construction output reports will also be released. The data is, however, likely to be overshadowed by the Brexit vote due later in the evening.

Brexit

The parliamentary vote comes a few weeks before the UK is expected to exit out of the EU. The general perception is for the UK parliament to reject the Brexit bill once again.

Overnight newswires reported that PM May managed to clinch a last-minute deal with EU's Juncker giving renewed hopes of anbrexit agreement. In a late night news conference, the British PM said:

'Today we have secured legal changes.'

This served as her announcement of the joint deal and unilateral decision addressing the Irish backstop agreement. The GBP surged 2% on the news overnight.

Pivot (invalidation): 56.35

Our preference Long positions above 56.35 with targets at 57.60 & 57.90 in extension.

Alternative scenario Below 56.35 look for further downside with 55.95 & 55.40 as targets.

Comment The RSI advocates for further upside.

Pivot (invalidation): 15.2800

Our preference Long positions above 15.2800 with targets at 15.5200 & 15.6000 in extension.

Alternative scenario Below 15.2800 look for further downside with 15.1900 & 15.0700 as targets.

Comment The RSI shows upside momentum.