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EUR/USD is showing little movement in the Tuesday session. Currently, the pair is trading at 1.1360, up 0.04% on the day. In economic news, German GfK Consumer Confidence remained steady, with a second straight gain of 10.8 points. It’s a busy day in the United States. We’ll get a look at construction and manufacturing data, as well as CB Consumer Confidence. All eyes will be on Fed Chair Jerome Powell, who will testify before the Senate Banking Committee. On Wednesday, Powell speaks before the House Financial Services Committee.

The markets are full of optimism that trade tensions between the U.S. and China are easing. The parties concluded a fourth round of talks last week and President Trump has said that the U.S. will not impose new tariffs on China on March 1, crediting “substantial progress” in the negotiations. There is even talk of a meeting between Trump and Chinese President Xi at the end of March, if an agreement is reached. However, investors may want to keep the champagne bottles on ice for a while longer. With almost no news about the substance of the talks, it remains unclear if China will agree to substantial structural changes in trade, as demanded by the United States. Another question mark is whether the current set of tariffs will be completely removed if a deal is reached. If not, market enthusiasm could evaporate, as the tariffs have caused enormous turmoil in international trade and dampened global growth. Still, if the sides reach a deal, it would be positive news for the hard-hit eurozone manufacturing sector and could trigger gains for the euro.

The Federal Reserve will be back in the spotlight this week, as Fed Chair Jerome Powell testifies before congressional committees on Tuesday and Wednesday. The Fed has been decidedly dovish early in 2019, in sharp contrast to 2018, when the Fed raised rates four times in order to keep the red-hot U.S. economy from overheating. However, the global trade war has taken a bite out of global growth, and the U.S. economy is unlikely to repeat last year’s performance. The markets will be listening closely for hints regarding future interest rate policy.

The dizzying rally on Monday turned into a hangover the next day. China’s blue-chip index A50 loses 1.7% after spiking by 7.8% during trading on Friday and Monday to its highs from May 2018. According to Fibonacci theory, the corrective pullback can quickly take away from the index another 1% to 12350 against 12470 at the moment. A deeper correction may return the index to past week consolidation area, that is, completely offset the previous two days growth.

We may face a more negative development scenario. When the market is in a phase of serious sale-off, the final chord is often extremely strong, and this is followed by cautious purchases and a global reversal.

There are risks now that we see a similar end of the rally. Chinese blue chips added more than 25% in less than 2 months on trade negotiations progress hopes. However, there is no deal at the moment, and the deadline is postponed. Still, there is a space for bad news, while all good news is already priced in.

The lack of US indices growth further complicates the situation. They failed to increase growth momentum, having turned to decline yesterday in the second half of the trading session. This decrease has attracted the market participants attention, since the S&P 500 index has been unfolding for the fourth time since October last year, from a region above 2800 points.

Both indices are also in the overbought zone and stopping the rally in these conditions is often the reason for a prolonged correction. The RSI for the S&P 500 futures fell below 70, which often precedes further decline. The same indicator for China A50 is now trying to break below this level, also leaving high chances that the local peak of the stock index is already behind.

Thus, there are too many obstacles for growth on the part of technical factors among the key markets, and excessively high expectations from the trade negotiations progress suggest that it won’t be so easy to surprise market participants with good news on this front in the near future.

Pound soaring on soft Brexit hopes or new referendum

The pound is tearing higher on Tuesday as we await another vote in Parliament tomorrow – albeit not on May's deal, again. The decision comes as the opposition Labour Party threw its support behind a second referendum if it couldn't get its own Brexit deal over the line and Theresa May opened the door to an extension, having failed to secure amendments with the EU in time for tomorrow's vote.

These are all bullish scenarios for the pound, despite remaining the unlikely options, not only for what they put on the table but also for who they put pressure on. The ERG – a group of hardline Brexiteers – many of whom favour a harder Brexit and some no-deal, will not be pleased with the recent developments with another referendum jeopardising the whole process and an extension threatening it. That may force them to reluctantly support May's deal, when push comes to shove.

Gold stumbling around multi-year highs

Gold has traded relatively flat in recent days, with softness in the dollar not propelling it higher on this occasion. Perhaps this is a sign that gold has become a little overbought and is prone to a correction, which wouldn't come as a surprise with the yellow metal having been on a solid run since the summer and suffered only two negative weeks in the last ten. We also have to remember that we've only traded above $1,350 on a handful of occasions over the last six years and haven't broken $1,400 since September 2013 so we are around the more recent highs already.

That's not to say that I expect a sharp reversal here, in fact longer term I think conditions remain favourable. But in the near-term, some softness wouldn't surprise me or be too concerning. We're seeing some support around $1,320 but we've hardly seen much of a bounce off this level, a move below towards $1,300 could provide an interesting test. This held earlier this month and could offer a big test for gold but even a break below here shouldn't spread and panic about prices longer term.

Oil sell-off a sign of overbought market

Oil prices have stabilised after Trump-inspired sell-off on Monday, as the US President once again complained about high oil prices and urged OPEC to "relax and take it easy". Trump has never been shy about voicing his opinions on oil prices but this particular tweet came at a time when the market was quite overextended to the upside having enjoyed a very good run since late last year.

This is probably therefore more a reflection of the market positioning that an interpretation that an intervention is coming. OPEC has not previously been deterred from cutting output in response to low prices, as we saw again late last year, and the levels we're currently seeing are more a reflection of the record US output, among other things. Still, it does suggest bulls are happy to cash in near-term which may signal that there's more potential for downside. If we do see corrective move, then $60-61 in Brent and $50-51 in WTI could be very interesting levels.

EUR/USD

Current level - 1.1354

Allow an intraday spike to 1.1400 to provoke a reversal for a slide through 1.3115 trigger, towards 1.1214 lows.

USD/JPY

Current level - 110.82

The short-lived spike to 111.20 is only an internal swing of the consolidation pattern and my outlook is bearish, for a break through 110.55, towards 110.20.

GBP/USD

Current level - 1.3148

The outlook remains positive above 1.3100, for a rise towards 1.3210 area.

On Tuesday, the yellow metal pierced the support of the 200-hour SMA. With that the commodity price was signalling that it will decline.

Gold has no technical support as low as the 1,315.00 mark. The metal might reach this level by the end of this week.

However, take into account that round numbers on the gold price charts have shown resistance and support to the commodity.

The USD/JPY has crashed the short and medium term patterns. Namely, it jumped suddenly on Monday when the pair broke the resistance of a medium scale descending pattern.

The event resulted in a sharp move upwards to the resistance of the most dominant ascending pattern near the 111.20 level. Afterwards, the rate declined down to the 55 and 100-hour SMAs at 110.80.

In general, from a technical perspective a surge up to the 111.00 mark should occur. However, monitor all fundamental news associated with the pair closely. Another sharp move might be possible.

The GBP/USD surged, as soon as it passed the resistance of the 1.3100 level. Soon after the event the rate touched the weekly R1 at the 1.3149 level. By the middle of Tuesday's trading the rate was testing a strong resistance cluster at the 1.3160 level.

Near that level a Fibonacci retracement level and a dominant trend line of a large scale descending pattern are located at.

If this cluster gets broken, the pair will approach the 1.3200 level, which is providing psychological resistance and is being strengthened by the upper trend line of a the most largest scale channel down pattern. Zoom out to see the larger patterns better.

On Tuesday the EUR/USD had remained in the previous trading session's range between 1.1365 and 1.1345. It had retreated to once more confirm the support of a dominant ascending pattern.

The forecast for a surge up to the 1.1380 mark remains in force. In general, that level could be reached, if the 55 and 100-hour SMAs push the pair higher.

However, the currency pair is too volatile for the mentioned simple moving averages to steadily push it higher. Moreover, the Brexit talks continue to cause moves on the EUR as often as the GBP.

The single European currency appreciated about 85 base points against the Japanese Yen on Monday. The currency pair broke a horizontal channel pattern during yesterday's trading session.

After hitting a swing high of 125.79 on Tuesday morning, the exchange rate started to sink and by the middle of the day, the pair tested the 50-hour simple moving average at 125.75.

By and large, it is likely that the EUR/JPY currency exchange rate aims at the upper boundary of a junior ascending channel pattern at 126.60 during the following trading session.

The Australian Dollar appreciated about 48 base points against the US Dollar on Monday. The currency pair was supported by a cluster formed by the weekly pivot point and the 100-hour simple moving average at 0.7135.

As for the near future, it is likely that the AUD/USD exchange rate will aim for a re-test of the support cluster as mentioned earlier.

If the cluster holds, bullish traders could push the currency exchange rate towards a weekly resistance level at 0.7201 today.

However, if the currency exchange rate passes the support line, a decline towards the 0.7100 regions could be expected.