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Market movers today

Today, we have an indicative Brexit vote on the way forward, which is unlikely to be that important anymore given PM Theresa May's promise to hold three votes on 12-14 March (on a Brexit deal, a no deal and an extension of Article 50, respectively). While we have talked a lot about the Cooper amendment recently, it may be pulled if the MPs have faith in May's promise. The votes in March are likely to be much more important at this point.

In Norway, retail sales and the unemployment rate are due out and in Sweden a lot of confidence indicators are due out. See page 2 for more information.

In Europe, consumer and business confidence indicators for February are due and we will look for any signs of whether the European economies are rebounding soon or not.

In the US, Fed Chair Powell's two-day hearing continues but it is unlikely to move the markets.

Selected market news

Asian equities are up 0.4% this morning as Trump seems upbeat about the meeting with Kim Jong-un as well as hinting on a series of trade deals between the US and Vietnam, thus showing the willingness of the American administration to continue striking deals and showing positive signs for the ongoing US-China trade talks.

US equities (S&P500­ -0.08%), meanwhile, seemed to have a hard time decoding Fed Chair Powell's testimony to the US Congress. Powell told Congress that the US economy faces 'cross currents and conflicting signals'. Powell also said that the US economy grew at a 'strong pace' last year, but acknowledged that the start to 2019 would imply a more data-dependent US monetary policy, as both inflation and employment seem to be in line with the Fed's dual mandate. Nothing much was new in terms of the current balance sheet roll-off and Powell continues to insist that the Fed can remain flexible on this matter. We expect the Fed at the March meeting to announce plans to end further balance sheet normalisation by the end of this year (see more in the FX Edge link under 'selected readings'). US treasury yields are down 3bp across the curve.

Oil prices has stabilised somewhat, Brent Crude +0.7%, after sources said that US crude oil inventories (to be disclosed today) will show a drop of some 4.2m barrels compared to a median estimated forecast of +3m barrels, and Russia saying that it follows a previous agreement with OPEC to lower production by having cut production by 140,000 barrels per day since December. Markets seem to put great emphasis on the fundamental ongoing supply constraints following in part the Venezuelan crisis. Oil prices were down 3% in Monday's trading session following Trump's comments that 'oil prices are getting too high' and that 'OPEC should relax'.

Daily Pivots: (S1) 110.28; (P) 110.68; (R1) 110.99; More...

USD/JPY drops notably today but stays above 110.25 minor support. Intraday bias remains neutral first. On the downside, break of 110.25 minor support will suggest rejection by 61.8% retracement of 114.54 to 104.69 at 110.77. And in that case, the rebound from 104.69 has likely completed. Intraday bias will be turned back to the downside for 108.49 support for confirmation. Nevertheless, firm break of 111.23 should confirm resumption of rise from 104.69 for 114.54 resistance.

In the bigger picture, while the rebound from 104.69 was stronger than expected, it's struggle to get rid of 55 day EMA completely. Outlook is turned mixed first. On the downside, break of 108.49 support will revive that case that such rebound was a correction. And, larger down trend is still in progress for another low below 104.62. But sustained trading above 55 day EMA will turn focus to 114.54. Decisive break there will confirmation completion of the decline from 118.65 (2016 high).

Sterling roars back to regain the 1.32 level for the first time since October as Labour shakes up Brexit negotiations with a plan to call an amendment blocking a no-deal Brexit and calling for a second vote. GBP is now the strongest currency YEAR-to-date, MONTH-to-date and week-to-date. Traders turn to Fed chair Powell's testimony later on today, shedding light on when and how it will end the sale of its $4 trillion balance sheet later this year. The Premium long trade in cable is now over 150 pips in the green one week after we highlighted our decision to lower the stop from 1.2800 to 1.2740. The Premium video will be sent to subscribers ahead of the NY Close.

We're now clearly into the endgame of the Brexit divorce deal drama and the major pieces are being put into play. The final battle is beginning to be the two major party leaders against their own parties as both face insurrections from those ostensibly worried about a no-deal Brexit but who are pushing for no deal at all.

The resignation of 7 Labour MPs last week clearly shook Corbyn as he contemplates a U-turn on policy where Labour would support a second referendum. That threatens outrage on the Brexit wing of his party where around 25 members of his party will refuse to support it.The by-product of Corbyn's move is that it could spark a rethink among Conservative hard liners who may soon decide that taking the current deal is better than risking a re-vote.

May is facing the same pressures from pro and anti-Brexit factions in her party and a push to extend/abandon Article 50.

It is becoming increasingly clear that parliament will never allow a no-deal Brexit. Most members of the House of Commons and House of Lords are furious at the reality that we are less than one month away from the official Brexit date of March 29 and no deal is in sight. But that means the possibility of a last minute agreement on Brexit grows larger than the possibility of a no-deal Brexit as the clock ticks away. And that is of course, a positive for the British pound. The next step is a cabinet meeting where they will discuss extending Article 50. That could trigger further sparks in GBP volatility.

After bottoming on January 3, 2019 low, EURJPY shows a sequence of higher high and higher low. We can see from the chart below that it has a bullish sequence and right side higher stamp. This suggests that pair should resume to the upside as far as dips stay above 124.1 (the invalidation level). Rally from February 9 low (124.14) unfolded as a triple three Elliott Wave structure. Up from 124.14, wave ((w)) ended at 125.54 and pullback to 124.21 ended wave ((x)). Pair then rallied in wave ((y)) to 125.94, second wave ((x)) pullback ended at 125.28, and wave ((z)) ended at 126.3. This move ended wave W of a larger degree.

Wave X pullback is in progress to correct the rally from 124.14 low in the sequence of 3, 7, 11 swing before the rally resumes. The next extreme area in 3 swing will come at 125.04 – 125.4 where buyers can appear and pair can at least bounce in 3 waves. The internal of wave X is unfolding as a zigzag Elliott Wave structure. Down from 126.3, wave ((a)) ended at 125.7, wave ((b)) ended at 126.03, and we we expect wave ((c)) of X to end at 125.04 – 125.41. As far as pivot at 124.14, the pair can see further upside once wave X pullback is complete.

1 Hour EURJPY Elliott Wave Chart

Daily Pivots: (S1) 0.9986; (P) 1.0003; (R1) 1.0019; More...

USD/CHF is still staying in tight range above 0.9981 temporary low and intraday bias remains neutral. On the downside, break of 0.9981 will resume the decline from 1.0098. Sustained trading below 55 day EMA (now at 0.9967) should confirm completion of rise form 0.9716, after rejection by 1.0128 resistance. In that case, deeper fall would be seen back towards 0.9716 support. On the upside, break of 1.0098 will extend the rise from 0.9716 to 1.0128 high next.

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 0.9716 will dampen this bullish view and at least bring deeper fall to 0.9541 key support.

For the 24 hours to 23:00 GMT, the EUR rose 0.29% against the USD and closed at 1.1393.

On the macro front, Germany's Gfk consumer confidence index remained steady at a level of 10.8 in March, at par with market expectations.

The US dollar declined against a basket of currencies yesterday, following dovish comments from the US Federal Reserve Chairman, Jerome Powell.

In the US, data indicated that the US building permits unexpectedly rose 0.3% on a monthly basis to an annual rate of 1326.0K in December, defying market consensus for a decline to a level of 1290.0K. Building permits had registered a revised reading of 1322.0K in the prior month. Further, the nation's CB consumer confidence index climbed to a level of 131.4 in February, compared to a revised level of 121.7 in the preceding month. Market participants had envisaged the index to rise to a level of 124.9. Additionally, the Richmond Fed manufacturing index advanced to a level of 16.0 in February, surpassing market expectations for a rise to level of 5.0 and compared to a level of -2.0 in the previous month. Further, the house price index rose 0.3% on monthly basis in December, undershooting market consensus for an increase of 0.4%. In the prior month, index had registered a rise of 0.4%.

On the flipside, housing starts unexpectedly plunged to two-year low level by 11.2% to an annual rate of 1078.0K in December, compared to a revised reading of 1214.0K in the prior month. Market participants had envisaged the housing starts to advance to 1256.0K.

The Fed Chairman, Jerome Powell, in his testimony, reiterated that the Fed would remain “patient” on further interest rate hikes, citing the various “crosscurrents and conflicting signals.” Meanwhile, Jerome Powell indicated that the US economic outlook was “generally favourable”, however warned of challenges from overseas. Further, he warned of growing risks in the economy, including a global slowdown, volatile financial markets and uncertainty related to the US trade policy.

In the Asian session, at GMT0400, the pair is trading at 1.1379, with the EUR trading 0.12% lower against the USD from yesterday's close.

The pair is expected to find support at 1.1348, and a fall through could take it to the next support level of 1.1318. The pair is expected to find its first resistance at 1.1406, and a rise through could take it to the next resistance level of 1.1434.

Moving ahead, traders would closely monitor the Euro-zone's M3 money supply for January along with the economic confidence index, business climate indicator, the consumer confidence index, all for February, set to release in a few hours. Later in the day, the US advance goods trade balance, factory orders and durable goods orders, all for December and pending home sales for January, will keep traders on their toes.

The currency pair is showing convergence with its 20 Hr moving average and trading above its 50 Hr moving average.

Daily Pivots: (S1) 1.3135; (P) 1.3212; (R1) 1.3328; More....

Intraday bias in GBP/USD remains on the upside for the moment. Current rally completes a a head and shoulder bottom pattern (ls: 1.2661, h: 1.2391, rs: 1.2773). Whole decline from 1.4376 should have completed. Further rally should be seen to 61.8% retracement of 1.4376 to 1.2391 at 1.3618 next. On the downside, break of 1.2968 minor support is needed to indicate short term topping. Otherwise, outlook will remain bullish in case of retreat.

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 turn focus back to 1.2391 low and then 1.1946.

For the 24 hours to 23:00 GMT, the GBP rose 1.06% against the USD and closed at 1.3259, amid news of a potential Brexit delay.

Data showed that UK’s BBA mortgage approvals unexpectedly rose to a level of 40.6K in January, compared to a revised level of 39.4K in the prior month. Markets had anticipated the BBA mortgage approvals to ease to a level of 38.4K.

In the Asian session, at GMT0400, the pair is trading at 1.3246, with the GBP trading 0.10% lower against the USD from yesterday’s close.

Overnight data revealed that Britain’s BRC shop price inflation advanced to a six-year high level of 0.7% on an annual basis in February, beating market expectations for a rise of 0.3% and compared to a gain of 0.4% in the preceding month.

The pair is expected to find support at 1.3151, and a fall through could take it to the next support level of 1.3057. The pair is expected to find its first resistance at 1.3314, and a rise through could take it to the next resistance level of 1.3383.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD declined 0.48% against the JPY and closed at 110.54.

In the Asian session, at GMT0400, the pair is trading at 110.59, with the USD trading 0.05% higher against the JPY from yesterday’s close.

The pair is expected to find support at 110.38, and a fall through could take it to the next support level of 110.18. The pair is expected to find its first resistance at 110.84, and a rise through could take it to the next resistance level of 111.10.

Looking forward, investors would keep an eye on Japan’s industrial production, retail trade and large retailers’ sales, all for January, slated to release overnight.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD declined 0.07% against the CHF and closed at 0.9998.

In the Asian session, at GMT0400, the pair is trading at 1.0005, with the USD trading 0.07% higher against the CHF from yesterday’s close.

The pair is expected to find support at 0.9989, and a fall through could take it to the next support level of 0.9972. The pair is expected to find its first resistance at 1.0021, and a rise through could take it to the next resistance level of 1.0036.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.