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EURUSD has found a strong resistance obstacle on the 1.1370 and 1.1360 resistance area, which encapsulates the 20-day simple moving average (SMA) and the 23.6% Fibonacci retracement level of the downleg from 1.1815 to 1.1215. The pair rebounded on the three-month low around 1.1230 on February 15 and is trying to post a bullish recovery despite the several resistance levels.

Momentum indicators are pointing to a neutral to positive bias in the short term with the RSI just below 50 but pointing slightly up. However, the MACD oscillator has jumped above the trigger line and is approaching the zero line in the daily timeframe.

In the wake of more positive pressures above the aforementioned zone, the market could meet resistance at the 40-day SMA currently at 1.1383 before moving sharply higher towards the 38.2% Fibonacci of 1.1445. A stronger barrier though could be found around the 50.0% Fibonacci, which coincides with the 1.1515 level, taken from the highs on January 31.

On the other side, a move to the downside could find support near the 17-month low of 1.1215 and the 1.1230 region. Should the market increase negative momentum below this area, the 1.1115, reached on June 2018 could be the next level to look for.

Summing up, the very short-term bias looks bullish-to-neutral, while the medium-term outlook holds neutral as long as the price trades below the 61.8% Fibonacci of 1.1585.

Rates: Trade truce extension lifts (Chinese) stock markets
Chinese stock markets gain up to 5% as US President Trump extended the trade truce beyond March 1 because of significant progress made in trade negotiations. Other regional bourses climb up to 1%. Spillover effects to FI and FX markets are negligible, but the story might nevertheless become the main trading theme amid an empty eco/event calendar.

Currencies: EUR/USD to profit from easing trade tensions
EUR/USD held in the 1.13 big figure on Friday. Comments from a Fed monetary policy forum failed to unlock the USD stalemate. This morning, US president Trump announcing a prolongation of the US-China trade truce is sending mixed signals for the dollar. For now, we see it as a tentative supportive for EUR/USD.

The Sunrise Headlines

• US equities closed Friday’s session in green with gains up to +0.91% (Nasdaq). Asian equity markets are edging higher this morning with China heavily outperforming (+4%) as the US will delay tariffs on Chinese import.
• US President Trump said he will extend the March 1 deadline to raise tariffs on Chinese goods. He said that “substantial progress” is made and hinted on a meeting with Chinese president Xi to conclude an agreement, possibly in March.
• UK PM May again postponed a parliamentary vote on her Brexit divorce agreement to March 12, only 17 days before Brexit day. May is said to seek a two month delay, while the EU is rumoured to pursue a 21-month extension.
• US President Trump leaves for Vietnam today for the second summit with North Korean leader Kim Jong Un later this week. Trump said to be happy as long as N-K keeps to refrain from weapon testing, but said not to lift sanctions
• Tensions rise in Venezuela as current President Maduro repelled foreign aid convoys. National Assembly leader Guaido said he will make an official request with international powers to consider “all options” to liberate the country.
• The Italian anti-establishment Five Star party is set to take a new blow in the regional elections on the island of Sardinia. League party senator Solinas (44%) lead the polls, followed by the centre-left (30%). 5SM polled third (16%).
• Today’s eco calendar contains the Chicago Fed Nat Activity Index for January and the Dallas Fed Manufacturing Activity for February. Bank of England’s chief Carney and Fed’s Clarida speak. The EMU calendar remains empty.

Currencies: EUR/USD To Profit From Easing Trade Tensions

EUR/USD to profit from prolonged trade truce?

EUR/USD still hovered within the 1.13 big figure on Friday. The German Ifo index again failed to meet market expectations and capped an early EUR/USD attempt to move higher. Later, the focus turned to the Fed monetary policy forum. Fed members signalled caution on policy normalisation. The Fed balance sheet will probably remain larger for longer to provide a comfortable level of liquidity. However, the direct impact of the Fed-headlines on USD trading was limited. EUR/USD closed little changed at 1.1335. USD/JPY finished the week at 110.69. This morning, Asian markets are starting the week in risk-on modus as US president Trump said he will postpone hiking tariffs on Chinese imports beyond the March 1 deadline. Asian equity indices show decent gains, with mainland China outperforming. The yuan strengthened and is trading in the USD/CNY 6.68 big figure. The impact on other major (USD) cross rates was less straightforward. EUR/USD (1.1345 area) is gaining a few ticks. USD/JPY (currently 110.60 area) reversed an earlier rebound (yen weakness) even as BOJ’s Kuroda reiterated the central bank can take action if prices don’t converge to target.

Today, US data (Chicago Fed Nat activity index & wholesale data and Dallas Fed index) will only be of intraday significance. The easing of trade tensions contains some mixed elements for EUR/USD trading. A better trade context is a positive for Europe. At the same time, the US is aiming for a weaker dollar against to yuan. This might cause spill-over effects on other USD cross rates. At the same time, the euro remains a cheap funding currency in a global risk-on context (in theory euro negative). We are inclined to see easing trade tensions as mildly euro supportive. Later this week, key US data (Q4 GDP) and the semiannual testimony of Fed’s Powell before Congress might also affect trading. Last week EUR/USD rebounded off of recent lows euro, but with no strong momentum. A better context on global trade might give EUR/USD more solid downside protection, but better data are probably needed for sustained EUR/USD gains. USD softness might also become a market topic. EUR/USD might drift higher in the 1.12/1.15 ST range.

Sterling remained well bid pn Friday. Despite a lack of news, investors assumed that talks behind the scene would be to avoid a no-deal Brexit. Later this week, Brexit will return to the UK Parliament. UK PM May is expected to ask more time with a final vote on March 12. At the same time, there are ever more headlines that the EU and the UK are preparing for a Brexit delay. Of late, sterling prove quite resilient. A delay scenario might be a ST sterling supportive. However, it a longer-term perspective it might cement a status of uncertainty

EUR/USD to profit from easing trade tensions?

What sounded like mission impossible a couple of months ago, now seems doable. President Trump announced late Sunday that he will delay the U.S. increase on Chinese tariffs which were scheduled for 1 March. He cited substantial progress in trade talks with China on substantial issues including intellectual property protection, technology transfer, agriculture, services and currency. If negotiations continue to move in the right direction, President Trump expects to meet his Chinese counterpart at his Mar-a-Lago resort to conclude on an agreement.

The trade dispute has been a painful one for both countries and the world, especially sinceit occurred when the economic cycle approached a peak. While China wants to prevent a hard landing, President Trump wants to fulfill one of his key campaign promises to correct the trade deficit. However, to support his re-election bid, Trump needs to avoid dragging down the U.S. economy and thus announce a deal, even though it might not look like a perfect one.

Equity markets in mainland China were the main beneficiaries of Trump’s announcement on extending the 1 March deadline. The blue-chip CSI300 Index surged 4% today, hitting its highest level since June 2018;it has entereda bull market, rising more than 23% from January lows. The Chinese Yuan also strengthened 0.4%, reaching a 7-month high.

The improved appetite forrisk has provided a boost forhigh beta currencies like the Australian and New Zealand Dollars, with both rising 0.3% during Asia trade. Elsewhere, the reaction has been muted, with the Euro, Pound and Yen moving in very tight ranges.

U.K. Prime Minister Theresa May’s decision to delay a parliamentary vote on her Brexit deal did little to move the Pound on Monday. The meaningful vote had been scheduled to take placeon Wednesday, but according to May, the vote hasnow been postponed to 12 March. The chances of delaying Brexit are increasing day by day, with a recent report inthe Telegraph indicating that May is considering delaying the process for up to two months. As long as the U.K. doesn’t crash out of the E.U. without a deal, the Pound is likely to continue holding near 1.30s in the near term.

While politics continue to be the primary driver of financial markets, this week has no shortage of key economic data. After the U.S. data missed on retail sales, durable goods, existing home sales and a couple of other releases, Thursday will bring the reading on fourth quarter GDP. Markets expect growth to have slowed down year-on-year, to 2.4% from 3.4% in the previous quarter. However, given the negative surprises received in past weeks, there’s also a chance to see a miss on GDP. The Federal Reserve’s preferred measure of inflation, PCE, is also due to be released on Friday along with Personal Income data.

Cans kicked but for very different reasons

It would appear that what was shaping up to be a pivotal week for the US and UK has seen the can kicked down the road before it even got underway.

From the US perspective, this is a positive move as it prevents tariffs being increased on Friday and indicates that we're seeing very encouraging progress in the negotiations. I think both countries wanted to avoid further tariffs at this point with the global economic environment at the start of 2019 looking very different to when the conflict started.

The greatest benefit to Trump's series of tweets on the extension has unsurprisingly been felt in China, with the Shanghai composite up 4% on the day. What may be surprising is that other regional bourses are lagging well behind. Obviously China was most at risk but the pain would be felt outside of its borders. Europe is expected to open marginally higher this morning, again not seeing any benefit from the announcement, with it having arguably been priced in amid all the speculation last week.

May gambles on Parliament not taking back control on Wednesday

Theresa May's decision to kick the can down the road and delay a vote on her deal until 12 March, at the latest (heard that before), is not quite receiving the same reception. May has long been accused of running down the clock as close to Brexit day as possible in order to leave MPs with a choice of no deal, no Brexit or her deal, which was heavily defeated in January.

This is only further evidence of that and suggests that the PM believes she has the numbers to defeat any amendments that seek to take control of the process away from her, including demanding an extension to article 50. That voting will still take place on Wednesday in what could be one of the more fiery sessions in Parliament that we've seen for quite some time. I wonder if May will bother to show up to this one.

Gold moves modestly higher as momentum fades

Gold is not quite seeing the boost from Trump's tweet than you might have expected, although outside of China, where is? It seems that this is very much one of those events that has been priced in over the weeks and the announcement effectively confirmed what we already knew, all the risk prior to that was to the downside. Still, it continues to look bullish with $1,320 having provided adequate support late last week. My one concern now is the declining momentum on each rally which can be a sign of exhaustion in the move, near term. A correction may be on the cards.

Oil remains bullish but for how long?

Oil has also shrugged off the good news which may be more surprising that others given that China is a major consumer and this has great impact potential for its economy. It has been on a great run since late last year but has oddly run out of steam having just broken major resistance. We're now back in consolidation mode which remains bullish but the momentum behind another rally – if we see one – may tell us a lot about its near term potential.

General Trend:

• Shanghai Composite rises to highest level since Aug 1, 2018 on progress in US trade talks
• US President Trump agrees to delay implementation of China trade tariffs, originally scheduled for March 1st
• UK PM May reportedly considering plan that would delay Brexit by 2-months; rules out meaningful vote on EU withdrawal in commons this week
• Shenzhen Telecom index up over 5.5%, supported by ZTE
• Equity markets in Japan supported by Electric/Appliances, Financials, Iron/Steel and Machinery shares.
• Financials in Australia lag amid speculated banking levy
• Bluescope Steel rises over 5% post earnings, sees FY19 EBIT up approx. 10%
• Lend Lease declines over 4% in Australia, H1 profits declined
• Yuan (CNY) gains on tariff delay, Trump confirmed progress was made on issues including currency
• Officials from China are scheduled to go back to Beijing on Monday.
• US retailer earnings in focus this week
• The second Trump/Kim summit is expected to be held in Vietnam from Feb 27-28th.

Headlines/Economic Data

Japan

• Nikkei 225 opened +0.7%
• (JP) Japan stock market is expected to host ~90 IPOs in 2019 v 90 in 2018 – Nikkei
• (JP) Japan Jan PPI Services y/y: 1.1% v 1.1%e
• 8306.JP Labor union expected to request first base pay increase in 4 years - Japanese Press
• (JP) Japan PM Abe Adviser Hamada: BoJ can abandon 2% inflation target as it is not absolutely crucial
• (JP) Japan Dec Final Leading Economic Index: 97.5 v 97.9 prelim; Coincident Index: 101.8 v 102.3 prelim

Korea

• Kospi opens +0.5%
• (KR) South Korea to offer firms incentives such as tax cuts, discounts on rental fees in industrial parks for job creating investment – Yonhap
• (KR) South Korea sells KRW598B in 20-yr Govt bonds; avg yield 2.065% v 2.17% prior

China/Hong Kong

• Hang Seng opens +0.6%; Shanghai Composite opens +1.2%
• (CN) President Trump: Made progress with China in the areas of intellectual property (IP), technology, currency and agriculture as well as many other areas; delay to March 1st implement tariff on China goods is due to productive talks
• (CN) US and China said to remain apart on issues related to enforcement and some structural issues; US Trade Rep Lighthizer: progress has been made on structural issues, but major hurdles remain - US financial press
• (CN) China Trade Delegation: Confirms substantial progress made on issues such as tech transfer, intellectual property rights, non-tariff barriers, service industry, agricultural and currency
• (CN) China PBoC Open Market Operation (OMO): Injects CNY40B in 7-day reverse repos v CNY40B injected in 7-day reverse repos prior; Net: CNY40B injected v CNY40B injection prior
• (CN) China PBoC sets Yuan Reference Rate: 6.7131 v 6.7151 prior
• (CN) New third stock board in China said to see 'strong' financing growth in Jan - financial press
• 2318.HK Planning a $1.0B Hong Kong IPO for fintech unit, OneConnect, in H2 this year
• HUAWEI.CN US President Trump said to be planning to hold talks on dropping criminal charges against Huawei - SCMP

Australia/New Zealand

• ASX 200 opened +0.2%
• (AU) Australia Labor leader Bill Shorten expected to announce a A$640M levy on banks and financial service companies to fund support for banking misconduct victims - Aussie press
• (NZ) NEW ZEALAND Q4 RETAIL SALES (EX INFLATION) Q/Q: 1.7% V 0.5%E; Y/Y: 3.5% V 2.7% PRIOR
• BSL.AU Reports H1 (A$) Net 624.3M v 441.2M y/y; EBITDA 1.06B v B y/y; Rev 6.40B v 5.48B y/y
• (AU) Australia sells A$400M v A$400M indicated in 3.25% June 21 2039 bonds, avg yield 2.5125% , bid to cover 2.66x
• LLC.AU Reports H1 (A$) Net 15.7M v 425.6M y/y; EBITDA 83.1M v 720.6M y/y; Rev 7.77B v 8.63B y/y
• BXB.AU Enters agreement to sell IFCO to Triton and Luxinva for enterprise value of $2.51B; to return $1.95B to shareholders through special dividend and buyback

Other Asia

• AAPL Suppliers in Taiwan for iPhone 6s said to receive rush orders due to strong sales in India -Taiwan Press
• (SG) Singapore Jan CPI M/M: -0.3% v 0.1%e; Y/Y: 0.4% v 0.6%e; Core CPI Y/Y: 1.7% v 1.8%e; Singapore Govt cuts 2019 headline CPI forecast to 0.5-1.5% (prior 1-2%), keeps core CPI outlook

North America

• BRK.A Reports Q4 Net earnings per A share -$15,467* v +$19,790 y/y, Rev $63.7B v $58.9B y/y

Europe

• (UK) PM May considering plan that would delay Brexit by 2-months; rules out meaningful vote on EU withdrawal in commons this week - Telegraph

Levels as of 12:50ET

• Hang Seng +0.2%; Shanghai Composite +3.9%; Kospi +0.0%; Nikkei225 +0.5%; ASX 200 +0.3%
• Equity Futures: S&P500 +0.2%; Nasdaq100 +0.3%, Dax +0.3%; FTSE100 +0.1%
• EUR 1.1325-1.1350; JPY 110.58-110.86; AUD 0.7134-0.7162; NZD 0.6853-0.6884
• Commodity Futures: Gold -0.0% at $1,332/oz; Crude Oil -0.3% at $57.11/brl; Copper +0.0% at $2.95/lb

Market movers today

While today is quiet in terms of economic data releases, we have a very eventful week ahead of us!

As we expected, US President Donald Trump postponed the deadline for raising tariffs on Chinese imports.

Trump will meet with the North Korean leader Kim Jong-un this week.

PM Theresa May has said there will be no so-called 'meaningful vote' on a full Brexit deal, as she is still negotiating with the EU. Instead, there will be another indicative vote on Wednesday , where the MPs will again try to force May to ask for an extension to the deadline. The question is, however, for how long if that is the case.

Fed Chair Jerome Powell begins his two-day hearing in the US Congress tomorrow.

In terms of economic data releases, we have plenty of important US releases. Housing market data is due out tomorrow, the initial estimate for Q4 GDP growth on Thursday and ISM manufacturing index on Friday.

In the euro area, preliminary HICP inflation data is due out on Friday.

Selected market news

In the early session, equity markets in Asia advanced with US futures and the CNY climbed after US President Donald Trump postponed the date for hiking tariffs on China 's imports. However, the rise in US futures calmed after China's state-run Xinhua news agency said that talks will be harder at the final stage.

Theresa May has postponed the next so-called meaningful vote, which should have taken place tomorrow, by another two weeks to 12 March, as she still does not have a new deal with the EU. We still have the indicative vote on Wednesday, where the most important thing is whether the House of Commons will force May to ask for an extension of Article 50 or not. As it is not the last chance for the MPs to do this, it will likely be a close call. The problem for Theresa May is that the EU has said it will not give any concessions before May shows a stable majority (see POLITICO). The Guardian indicated that the EU would prefer a long extension of Article 50. We have argued for some time this may be the best way forward without either side losing face, as more details on the future relationship would make the backstop redundant.

On Sunday 24 February, The Telegraph reported that Theresa May is considering a plan under which Brexit could be delayed for up to two months . The UK government has prepared a series of options, which were disseminated over the weekend, in order to avoid resignations by ministers determined to support a backbench bid to take a no-deal Brexit off the table. The options contain making a formal request to Brussels to delay Brexit if May cannot agree on a deal by 12 March. On the other hand, the EU is considering telling her that if she cannot get her Brexit deal through parliament and wants to delay the departure date, the country will have to stay in the bloc until 2021, Bloomberg reported.

For the 24 hours to 23:00 GMT, the EUR slightly rose against the USD and closed at 1.1337 on Friday.

On the data front, the Euro-zone's final consumer price inflation slowed for the third consecutive month to 1.4% on an annual basis in January, confirming the preliminary print and in line with market expectations. In the previous month, the CPI had recorded a revised rise of 1.5%.

Separately, in Germany, seasonally adjusted final gross domestic product (GDP) remained steady on a quarterly basis in the fourth quarter of 2018, at par with market expectations and confirming the preliminary print. In the prior quarter, GDP had registered a drop of 0.2%. Meanwhile, the nation's Ifo business climate index slid to its lowest level since December 2014 to 98.5 in February, compared to a revised level of 99.3 in the prior month. Market participants had envisaged the index to ease to a level of 98.9. Moreover, the Ifo business expectations index unexpectedly declined to a level of 93.8 in February, defying market expectations for an unchanged reading. In the prior month, the index had registered a revised level of 94.3. Further, the Ifo current assessment index dropped to a level of 103.4 in February, more than market consensus for a decline to a level of 103.9. In the preceding month, the index had registered a revised reading of 104.5.

In the Asian session, at GMT0400, the pair is trading at 1.1342, with the EUR trading a tad higher against the USD from Friday's close.

The pair is expected to find support at 1.1320, and a fall through could take it to the next support level of 1.1298. The pair is expected to find its first resistance at 1.1360, and a rise through could take it to the next resistance level of 1.1378.

Amid lack of macroeconomic releases in the Euro-zone's today, traders would focus on the US Chicago Fed national activity index for January and the Dallas Fed manufacturing activity for February, scheduled to release later in the day.

The currency pair is showing convergence with its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the GBP rose 0.16% against the USD and closed at 1.3057 on Friday, amid diminishing possibilities of a no-deal Brexit.

In the Asian session, at GMT0400, the pair is trading at 1.3069, with the GBP trading 0.09% higher against the USD from Friday’s close.

The pair is expected to find support at 1.2998, and a fall through could take it to the next support level of 1.2927. The pair is expected to find its first resistance at 1.3110, and a rise through could take it to the next resistance level of 1.3151.

With no macroeconomic releases in UK today, investors would look forward to global macroeconomic releases for further directions.

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

For the 24 hours to 23:00 GMT, the USD marginally rose against the JPY and closed at 110.69 on Friday.

In the Asian session, at GMT0400, the pair is trading at 110.65, with the USD trading slightly lower against the JPY from Friday’s close.

The pair is expected to find support at 110.50, and a fall through could take it to the next support level of 110.36. The pair is expected to find its first resistance at 110.85, and a rise through could take it to the next resistance level of 111.06.

Trading trend in the Japanese Yen today, is expected to be determined by Japan’s coincident index and leading index, both for December, scheduled to release in a while.

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 0.10% against the CHF and closed at 1.0002.

In the Asian session, at GMT0400, the pair is trading at 0.9991, with the USD trading 0.11% lower against the CHF from yesterday’s close.

The pair is expected to find support at 0.9978, and a fall through could take it to the next support level of 0.9964. The pair is expected to find its first resistance at 1.0015, and a rise through could take it to the next resistance level of 1.0038.

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