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GBP/USD declined heavily this past week and broke the key 1.3100 support area. EUR/GBP gained traction and broke the 0.8580 and 0.8600 resistance levels to move into a positive zone.

Important Takeaways for GBP/USD and EUR/GBP

• The British Pound faced an increase in selling pressure and tumbled below 1.3100.
• There is a major bearish trend line in place with resistance at 1.3110 on the hourly chart of GBP/USD.
• EUR/GBP climbed higher recently and traded above the 0.8600 resistance level.
• There was a break above a key bearish trend line at 0.8610 on the hourly chart.

GBP/USD Technical Analysis

The British Pound faced a strong resistance above the 1.3340 level against the US Dollar. The GBP/USD pair started a significant downside move and broke the 1.3300 and 1.3200 support levels.

The decline was strong as the pair even broke the 1.3100 pivot level and the 50 hourly simple moving average. Sellers even succeeded in clearing the 1.3060 and 1.3020 support levels. This week, the pair opened with a gap down below 1.3000 and traded as low as 1.2960 on FXOpen.

The pair is currently consolidating losses below 1.2980, with an initial resistance near the 1.3000 level and the 23.6% fib retracement level of the recent decline from the 1.3109 high to 1.2960 low.

On the upside, there are many resistances near the 1.3000, 1.3020 and 1.3050 levels. The 50% fib retracement level of the recent decline from the 1.3109 high to 1.2960 low is also near the 1.3035 level.

Moreover, there is a major bearish trend line in place with resistance at 1.3110 on the hourly chart of GBP/USD. Therefore, if the pair corrects higher, it is likely to face sellers near the 1.3020 and 1.3050 levels.

On the downside, an initial support is near the 1.2960 low. If there are more losses, the pair could tumble towards the 1.2920 and 1.2900 support levels in the near term.

EUR/GBP Technical Analysis

The Euro gained traction above the 0.8580 resistance levels against the British Pound. The EUR/GBP pair climbed higher and broke the 0.8600 and 0.8605 resistance levels to move into a positive zone.

The recent upward move was strong as there was a close above the 0.8620 level and the 50 hourly simple moving average. During the rise, there was a break above a key bearish trend line at 0.8610 on the hourly chart.

The pair recently traded above 0.8640 and opened with a gap up to 0.8662. At the moment, the pair is correcting gains towards the 0.8650 level. The main support is near the 0.8635 level and the 23.6% Fib retracement level of the recent wave from the 0.8547 low to 0.8662 high.

If there are more losses, the pair could revisit the 0.8620 support level, where buyers are likely to emerge. On the upside, the pair could trade above the 0.8665 and 0.8670 resistance levels. The next key resistance is near the 0.8700 level.

Overall, the British Pound is facing a strong selling interest, but there are chances of a short term recovery, especially to fill the recent gap in GBP/USD and EUR/GBP. However, any major recovery is likely to remain capped in the coming days.

UK now enters into a crucial week with important Brexit votes. Prime Minister Theresa May failed to secure the needed changes to Irish backstop. EU chief negotiator Michel Barnier threw out a package of "concessions" that was rejected bluntly by the UK government. Foreign Minister Jeremy Hunt insisted that the meaningful vote on the Brexit deal will still go ahead on Tuesday, March 12. But the Sunday Times predicted that May will lose by 230 votes again, the same margin of defeat as in January for effective the same deal in the Commons.

Hunt now turned to Brexiteer Tories and threatened that vote down the deal would open the door to no Brexit. He said, "If you want to stop Brexit you only need to do three things: kill this deal, get an extension, and then have a second referendum. Within three weeks those people could have two of those three things ... and quite possibly the third one could be on the way."

On the other hand, the EU is trying to push the UK to make up it's mind clearly, rather that getting an extension with no purpose. France's EU affairs minister Nathalie Loiseau said "More time, to do what? We've had two years ... If there's nothing new, more time will not do anything other than usher in more uncertainty, and uncertainty just creates anxiety... It's not time that we need, but a decision."

Manfred Weber, the chairman of the European People's Party in the European Parliament also said "May should end her zigzag course." Also, "British politicians, and I mean Labour leader Jeremy Corbyn in particular, must finally put their own careers and party considerations behind them and look at the country's interests again."

In short, there will be another parliamentary vote on the Brexit deal on March 12, next Tuesday. As it's defeated, a vote on no-deal Brexit will then be held on March 13 to see if there is explicit consent on this path. If not, there will be another vote on Article 50 extension on March 14.

Key Highlights

• The Euro declined heavily and broke the 1.1250 support against the US Dollar.
• There was a break below a couple of important bullish trend lines on the 4-hours chart of EUR/USD.
• The US nonfarm payrolls in Feb 2019 came in at 20K, less than the 180K forecast.
• The US Retail Sales for Jan 2019 will be released today, which could increase 0.1% (MoM).

EURUSD Technical Analysis

The Euro failed to stay above the 1.1400 level and declined heavily against the US Dollar. The EUR/USD pair broke the 1.1300 and 1.1250 support levels to enter a bearish zone.

Looking at the 4-hours chart, the pair settled below the 1.1300 support level, the 200 simple moving average (green, 4-hours), and the 100 simple moving average (red, 4-hours). Sellers gained traction and pushed the pair below the 1.1200 support.

A new monthly low was formed at 1.1176 before the pair started an upside correction. The pair moved above the 23.6% Fib retracement level of the last decline from the 1.1419 high to 1.1176 low.

However, there are many hurdles for buyers near the 1.1280 and 1.1300 levels. The key resistance could be 1.1300 since it coincides with the 50% Fib retracement level of the last decline from the 1.1419 high to 1.1176 low.

Therefore, if there is an upside correction, the pair is likely to face sellers near 1.1300 or the 100 simple moving average (red, 4-hours).

Fundamentally, the US nonfarm payrolls figure for Feb 2019 was released this past Friday. The market was looking for an increase of 180K, less than the last 304K.

The result was very disappointing as the US nonfarm payrolls came in at less than 50K at 20K. On the other hand, the last reading was revised up from 304K to 311K. On the positive side, the unemployment rate declined from the last reading of 4% to 3.8%.

The report added that:

The unemployment rate declined by 0.2 percentage point to 3.8 percent in February, and the number of unemployed persons decreased by 300,000 to 6.2 million. Among the unemployed, the number of job losers and persons who completed temporary jobs (including people on temporary layoff) declined by 225,000.

The result was negative and increased selling pressure on the US Dollar. However, downsides remain supported and upsides in EUR/USD and GBP/USD are likely to face sellers.

Economic Releases to Watch Today

• Germany’s Trade Balance for Jan 2019 – Forecast €21.0B, versus €19.4B previous.
• US Retail Sales Jan 2019 (MoM) – Forecast +0.2%, versus -1.2% previous.

STOCKS

After having beaten down badly last week, the global equities might get a breather in the near term. Although the short-term view continues to remain negative, a corrective rally or a consolidation is possible in the coming days before the downtrend resumes.

Dow Jones (25,450.24, -22.99, -0.09%), though closed in red on Friday, has managed bounce from the low of 25,252. The overall bearish outlook is intact. But a corrective rally to 25,600-25-700 cannot be ruled out before the overall downtrend resumes targeting 25,100 and 25,000.

DAX (11,457.84, -59.96, -0.52%) has a support at 11,377 (21-day moving average). While above this support, an intermediate bounce to 11,550 is possible. But a break below 11,377 will pave way for a fall to 11,320 and 11,300.

Nikkei (21,069.93, +44.37, +0.21%) has bounced after testing the psychological support level of 21,000. If the index continues to trade above 21,000 an upmove to 21,350 is possible in the near term.

Shanghai (3006.19, +36.33, +1.22%) tumbled below 3,000 on Friday. The level of 3,010 will be a key resistance which has to be breached for the index to gain strength again. While below 3,010, a fall to 2,930 and 2,900 is possible in the coming days.

Sensex (36,671.43, -53.99, -0.15%) and Nifty 50 (11,035.40, -22.80, -0.21%) remains mixed. A key support for Sensex is at 36,480 and Nifty at 11,000 which will need a close watch. While these supports hold, Sensex can rise to 36,930 and 37,000 and Nifty 50 can target 11,150 in the coming days.

COMMODITIES

Oil is retaining its sideways range. Gold and Silver has bounced from a key support and can consolidate for a few sessions before moving further higher. Copper is near a crucial support.

Gold (1296) may consolidate between 1290 and 1300 for some time with the bias inclined towards a rise to 1310 in the near term while above 1290.

Silver (15.28) has support at 15.15. Though a test of it cannot be ruled out, a break below it looks less probable. A rise to 15.55-15.60 can be seen in the coming sessions.

Copper (2.89) is trading above a crucial support level of 2.88 (21-day moving average). If it manages to sustain above it, a bounce to 2.93 and 2.95 is possible in the coming days. But a break below 2.89 will see the corrective fall extending towards 2.84 in the coming days.

Oil has bounced sharply after tumbling to test the range lows on the 64-68 sideways range on Brent (65.87) and the 55-58 range on WTI (56.32) remains intact. Brent has reversed sharply higher from around 64. While above 65.20 an upmove to 67 is possible in the near term. WTI has an immediate support at 55.85 and a test of 57.2 is possible while it sustains above this support.

FOREX

Overall currencies are mixed. Euro, Euro-Yen, Dollar Yen, Pound and Aussie have bounced from support levels and could rise in the near term or see some range trade while USDCNY could face resistance above current levels. USDINR is trading near lower support and could soon see a bounce.

Trading below 97.70, Dollar-Index (97.42) needs to break below 97.25 to fall further towards 97 or lower. Immediate support is seen near 97.25 which if holds could push the index back towards 97.70.

Euro (1.1229) has risen from levels seen near 1.1199 on Friday. A break above 1.1250 could take the current rise towards 1.13-1.14 again. While below 1.1250, there is scope for re-testing levels of 1.11 on the downside.

Euro-Yen (124.75) is almost stable. A break below 124.40, if seen would turn bearish for the coming sessions towards 123.60. The pair needs to bounce back immediately in order to turn bullish towards 126-127 again. On the line charts, there is scope of falling to 123 before a bounce is seen in the longer run.

Dollar Yen (111.10) tested 21-Ma on the daily charts near 110.75 and has bounced from there to trade near current levels. Unless a fall below 110.75 is seen again, Dollar-Yen looks bullish towards 112.0-112.5 for the near term.

Pound (1.2969) has fallen as expected and could test immediate support at 1.2950 from where a bounce is expected back towards 1.31/32 levels. Watch price action near 1.2950.

Aussie (0.7034) resolved to the upside bouncing from 0.70 and while the bounce sustains, a rise towards 0.7150 looks possible.

USDCNY (6.7214) has risen but could face resistance near 6.73 which if holds could turn bearish for USDCNY in the near term. On the other hand, if the pair manages to break above 6.73, it could turn bullish for the medium term towards 6.75 or even higher.

Dollar Rupee (70.08) has some room for a test of 69.75/50 on the downside. But in case the pair bounces from current level itself, it could soon target 70.50/70 on the upside in the next 1-2 weeks. Watch price action near current levels as failure to rise above 70.20 immediately could give some scope of falling towards 69.75/50 again in the medium term.

INTEREST RATES

The US yields are almost stable. The 2Yr (2.47%), 5Yr (2.44%), 10Yr (2.63%) and 30Yr (3.02%) have some more scope on the downside before a bounce is seen. Supports are visible near 3% on the 30YR, 2.6% on the 10Yr and 2.42% on the 5YR. The yields could now start to bounce from current levels and look bullish for the near term after a possible dip of 1-2bps in the next few sessions.

The 10Yr GOI (7.5338%) needs to bounce back from here immediately, else could fall towards 7.45% is possible in the near term which could also drag down Dollar-Rupee to lower levels. On the contrary, if the yield bounces from current levels, a rise towards 7.65/70% could be on the cards.

Wall Street shrugs off payrolls miss

Wall Street closed higher for the first time in five days on Friday despite a heavy headline miss on the US payrolls number. Other parts of the report, unemployment rate and wages growth, were stronger. China reports “some progress” in the trade talks with the US.

US30USD Daily Chart

The US30 index touched the lowest in almost a month on Friday after the payrolls data, but rebounded to finish higher, snapping a four-day losing streak

The 200-day moving average at 25,131 remains untouched, supporting prices since February 12

US economy added just 20,000 jobs in February, the least since September 2017 and much less than the 180,000 expected. The unemployment rate fell to 3.8% and avg hourly earnings rose 3.4% y/y, the most in a decade. Seasonality, the weather and the US government shutdown have been blamed for the poor report, introducing a bit a scepticism about the headline number.

DE30EUR Daily Chart

The Germany30 index slid for a third consecutive day on Friday, taking its cue from Wall Street and the hangover from the ECB’s moves the previous day. Rumours were also circulating that some ECB officials were even more pessimistic about the outlook and considered the latest staff projections to be too optimistic

Trendline support has risen to around 11,300 today, with other support coming in at 11,260 as the 100-day moving average lurks below at 11,197

Germany’s industrial production data for January are due today, seen rising 0.4% m/m after December’s 0.4% contraction. Data reported Friday showed factory orders fell 2.6% m/m in the same month.

CN50USD Daily Chart

The China50 index fell for a third straight day on Friday following dismal trade numbers for February. It fell to an 11-day low.

The index has fallen 7% from Wednesday’s peak and is approaching the 38.2% Fibonacci retracement of this year’s rally at 12,111

Both exports and imports declined sharply in February, partly due to the timing of the Lunar New Year holiday this year, but also amid weakening demand. Exports fell 20.7% y/y, the most in three years, while imports declined 5.2% y/y, lower than the -1.4% economists had predicted.

Trade trembles and Brexit bumbling start the week

Slightly bruised but certainly not battered, Wall Street limped into the close on Friday following massive Non-Farm Payrolls (NFP) misses. Although a print of 20,000 jobs instead of the expected 180,000 was not what investors wanted to see, all other data pointed to a reasonably rosy picture in the US. Unemployment fell to near-record lows, housing starts rebounded to 1.2 million and wage data showed an increase of 3.4%. Hardly the sort of data to upset the economic applecart given the NFP is a volatile data set at the best of times.

This likely explains why US stocks recorded only modest declines with the S&P falling 0.21%, the Dow Jones 0.09% and the Nasdaq 0.18% to close the week. Asia fared far worse with China’s export data collapsing by 20%. The China Stock Index (CSI) 300 tanked by 4.4%, while the Hang Seng and Nikkei were close behind, both dropping 2%. Worries over China are likely to be a recurring theme today in Asia as we await details (still) on the US-China trade talks.

The US dollar continues to defy the harbingers of doom (except the author), falling only modestly on Friday, ending a seven-day climb in the dollar index. The greenback continued to benefit from haven status as the rally in the benchmark 10-year bonds continued unabated, finishing the week up 13 basis points. Bond inflows are supportive of the dollar, as is the fact that of all major central banks in the world, the Federal Reserve is best positioned to turn on the monetary taps should a recession arrive.

The data schedule is packed this week with a nice geographical spread, starting with German Industrial Production this afternoon followed by US retail sales this evening. Tuesday sees Australian homes loans and US inflation numbers release but the main event will be the UK Brexit Vote, which rests on a hopefully-palatable motion being put forward to the House of Commons. This could drag on with successive votes following on Wednesday and Thursday. Thursday sees China release highly-anticipated retail sales and industrial production numbers.

The week’s trading is likely to be highly headline driven, with short-term volatility around political and data news. The almost forgotten US-China trade talks have been subsumed in a cacophony of data noise but remain the only game in town and will set the macro-economic tone for the rest of H1 2019. Until then, traders and investors will have itchy-trigger fingers across most asset classes.

FX

The US dollar should remain strong as haven inflows into the bond market continue. Friday’s fall is likely corrective after dollar indices extended their run higher. China jitters will likely see regional currencies on the back foot today, particularly in North Asia. The Japanese yen (JPY) could buck the trend as it saw safe-haven flows of its own on Friday.

The Australian (AUD) and New Zealand (NZD) dollars may remain under pressure as proxies for China risk aversion. A weak Australian home-loans print tomorrow could accelerate this trend given the wobbles in the lucky country’s not-so-lucky property market at the moment.

Sterling (GBP) may be put into the too-hard box trading wise as we face three potential Brexit votes on successive days from tomorrow. The GBP has given all its recent gains back to remain anchored under 1.3000 this morning, and being long above 1.3200 remains a potentially risky proposition. The pound is down 0.4% today as the Financial Times reports Prime Minister May might be forced to resign. The street is keen to buy Her Majesty’s pound on any sign of a Brexit deal breakthrough or Article 50 extension, but with the 29 March fast-approaching, there is no guarantee that Brexit day will be B-day or bidet.

Equities

Asian markets will likely stay in the red today unless there is a definite trade deal announcement. Around the region, the tone has disengaged from Wall Street to some extent, taking on a much more specifically China outlook. European stocks may not be out of the firing line either if Germany’s industrial production data tonight is poor.

Oil

Both Brent crude and WTI have eked out small gains in early trading following Fridays approximately 1% falls. The rise is most likely due to gentle profit-taking rather than a return of confidence. OPEC+’s intention to extend their cuts beyond April continues to be balanced by increasing US production. But the China data has spooked oil markets and will likely overhang them like a dark cloud this week.

Gold

Gold rallied to USD1,299.00 an ounce on Friday benefitting from safe-haven flows and a weaker dollar. With so much uncertainty this week, that theme could continue with buyers of the yellow metal lining up on dips.

GOLD looks to recover further higher on bull pressure as it closed higher on Friday. 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. Conversely, resistance resides at the 1,310.00 level where a break will aim at the 1,320.00 level. A turn above there will expose the 1,330.00 level. Further out, resistance stands at the 1,340.00 level. All in all, GOLD looks to move further lower.

EURUSD looks to recover further higher in the new week despite its lower close at the end of the week (see weekly chart). Support comes in at the 1.1200 where a break will aim at the 1.1150 level. A break below here will target the 1.1100 level. Further down, support lies at the 1.1050. On the upside, resistance resides at 1.1400 level with a break through there opening the door for further upside towards the 1.1450 level. Further up, resistance comes in at the 1.1500 level where a violation will expose the 1.1550 level. All in all, EURUSD continues to threaten further downside pressure but with caution.

Comments from Chinese officials over the weekend suggested they're trying to push back on US demand regarding currency manipulation. China PBoC Governor Yi Gang said over the weekend that both sides reached consensus of many important issues, including competitive devaluation of currencies. But he also emphasized that yuan exchange-rate formation mechanism is in line with G20 standard.

Yi went further to noted that US and China discussed respecting the "autonomy" of each other's monetary policy. Vice Commerce Minister Wang Shouwen also said on Saturday that any "enforcement mechanism for a prospective trade deal must be "two way, fair and equal." Apparently, Chinese officials were avoiding any mention of one-sided pledge on currency.

On the other hand, White House economic advisor Larry Kudlow said there was a breakthrough with China agreeing to promote "stable currency and avoid competitive devaluation. He's "positive and bullish" on a US-China trade deal. And he expects the agreement to be finalized by April. He also hailed that Trump administration is making "headway" in the negotiations and is "making great progress". Currently, Kudlow added that negotiators are "working out some of the difficult final points" And, "it's got to be good, it's got to be fair and reciprocal, and it has got to be enforceable -- that's an important point."

USDCHF risk remains higher with eyes on the 1.0127 zone as it expects more strength in the new week towards its key resistance. Resistance stands at the 1.0150 level. A break of there will clear the way for a run at the 1.0200 level. Above here, resistance lies at the 1.0150 level and then the 1.0250 level. Its weekly RSI is bullish and pointing higher suggesting further upside. On the downside, support is seen at the 1.0000 level. A turn below here will set the stage for more decline towards the 0.9950 level. And then the 0.9900 level. Further down, support resides at the 0.9850 level. All in all, USDCHF faces further upside pressure following its higher close the past week.