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Daily Pivots: (S1) 0.7037; (P) 0.7122; (R1) 0.7174; More...

Intraday bias in AUD/USD remains cautiously on the downside for 0.7054 support first. Decisive break there will complete a head and shoulder term pattern (ls: 0.7235, h: 0.7295, rs: 0.7206). That should confirm completion of rebound from 0.6722. Further decline should be seen to 61.8% retracement of 0.6722 to 0.7295 at 0.6941 next. On the upside, though, break of 0.7206 will turn focus back to 0.7295 resistance instead.

In the bigger picture, as long as 0.7393 resistance holds, we'd treat fall from 0.8135 as resuming long term down trend from 1.1079 (2011 high). Decisive break of 0.6826 (2016 low) will confirm this bearish view and resume the down trend to 0.6008 (2008 low). However, firm break of 0.7393 will argue that fall from 0.8135 has completed. And corrective pattern from 0.6826 has started the third leg, targeting 0.8135 again.

The euro has a neutral intraday bias against the US dollar as buyers and sellers struggle to take control of price-action in the short-term. The 1.1337 level is the key intraday pivot point, with the EURUSD pair now confined to tight range bound trading conditions. Technical indicators on the four-hour time frame are moving lower, especially if sellers can hold price below the pairs pivot point.

The EURUSD pair is bearish while trading below the 1.1337 level, key support is found at the 1.1300 and 1.1280 levels.

If the EURUSD pair trades above the 1.1337 level, key resistance is found at the 1.1370 and 1.1410 levels.

The British pound is attempting to move lower against the US dollar on Friday after buyers once again failed to hold price above the key 1.3095 resistance level. A sustained technical break below the 1.3000 support level should encourage strong selling towards the 1.2965 level. If buyers can move price above the 1.3095 level the GBPUSD pair could start to rally towards the 1.3200 level.

The GBPUSD pair is only bullish while trading above the 1.3000 level, key technical resistance is found at the 1.3095 and 1.3200 levels

If the GBPUSD pair trades below the 1.3000 level, sellers may test towards the 1.2965 and 1.2900 support levels.

The Japanese yen declined slightly today after weak CPI numbers from the country. In January, the national CPI rose by 0.2%, which was lower than December’s CPI of 0.3%. The national core CPI rose by 0.8% in the month, which was slightly higher than December’s 0.7%. In recent years, Japan has had very low inflation, despite the BOJ’s large quantitative easing program and negative interest rates. The low inflation rate has made it very difficult for the BOJ to increase interest rates.

Focus will remain on the euro, because of the vital information that is expected today. In the morning hours, Germany will release its Q4 GDP reading. The number is expected to show that the economy expanded by 0.9% in the quarter. Later on, traders will receive the business expectations and climate data from ifo. The ifo business climate index is expected to be at 99, which will be slightly lower than the expected 99.1. Next, the European Union will release the inflation numbers, which are expected to show that the CPI remained unchanged at 1.4% in January. The core CPI is expected to remain unchanged at 1.1%.

Investors will also focus on Brexit and trade news. With just a month before the UK completely leaves the European Union, there are concerns that the country is at risk of leaving without a deal. Talks between Theresa May and EU leaders have not been fruitful. This is because the EU accuse May of not knowing what she wants. Observers believe that she is buying time to force the MPs to vote for her deal just before the deadline. Regarding trade, investors will focus on the US-China talks, and the US-EU standoff.

EUR/USD

The EUR/USD pair was little moved in overnight trading. The pair is currently trading at 1.1355, which is along the 21-day and 42-day EMA. As a result, the EMA has been largely unmoved and is currently at the 47 level. The pair is currently in consolidation mode, and it could move in either direction. This will mostly depend on the inflation, confidence, and GDP numbers from Europe.

USD/JPY

The USD/JPY pair was also unmoved in the Asian session. The pair has been in consolidation mode for the past few days, which makes the price along the 21-day and 42-day EMAs. It is now trading at 110.766, which is along the upper band of the Bollinger Bands. The pair could remain within this channel because there will be no major data from the US and Japan today.

GBP/USD

The GBP/USD pair too was little moved today but the pair is up for the week as investors hope that a no-deal Brexit can be averted. The pair is now trading at 1.3027. This price is slightly above the 21-day and 42-day EMAs. The RSI has fallen from an overbought level of 75 to the current 55. The On Balance Volume has moved slightly lower. The pair’s movement today will depend on the progress on Brexit.

Daily Pivots: (S1) 110.55; (P) 110.73; (R1) 110.88; More...

Intraday bias in USD/JPY remains neutral as range trading from 111.13 is still in progress. On the downside, break of 110.00 resistance turned support will suggest rejection by 61.8% retracement of 114.54 to 104.69 at 110.77 and the rebound from 104.69 has likely completed. Intraday bias will be turned back to the downside for 108.49 support for confirmation. Nevertheless, break of 111.13 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 couldn't sustain above 55 day EMA yet. 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).

• Rates: First signs of fatigue in the Bund?
  Mixed EMU PMI's were no longer sufficient to add to Bund gains. On the contrary. Some investors decided to take some profit with the Bund testing first minor support. We hope to see a confirmation of this shift after today's German Ifo Business sentiment. Consensus expects a stabilization in February with risks slightly tilted to the upside.
• Currencies: EUR/USD idled in 1.13 area as (US & EMU) data fail to give guidance
  The euro temporary outperformed the dollar yesterday, but finally US & EMU data were not able to give clear guidance for trading in the euro or the dollar. Today, German Ifo business sentiment might have some intraday significance for EUR/USD trading. Fed speaking on the balance sheet roll-off is a wildcard for (USD) trading.

The Sunrise Headlines

• US equities posted modest losses yesterday on weak economic data. Asian equity markets are mainly trading in red this morning with China outperforming on hopeful signals from the China/US trade negotiations.
• US President Trump will meet China's vice-premier and lead negotiator Liu He today. The meeting caps the latest round of trade talks, with both parties working towards a (preliminary) deal to avoid a new round of tariffs.
• The European Union expects that UK PM May will be forced to request a three-month delay to Brexit. The bloc sees this as a ‘technical extension' to give the UK Parliament time to pass the necessary legislation.
• Australian PM Morrison tried to reassure investors that the relationship with China is not as bad as it looks, following the ban on Australian coal imports in a Chinese port. He said the move is common, but asked China for clarification.
• Bank of Canada Governor Poloz signalled that the BoC is in no rush to continue monetary tightening. He said that interest rates eventually need to move up into neutral range, but the economic uncertainty warrants patience for now.
• The Reserve Bank of New Zealand said that proposals to increase bank capital requirements could raise borrowing costs. RBNZ governor Bascand hinted a rate cut could be necessary to offset the resulting tighter monetary conditions
• Today's eco calendar contains German IFO Business sentiment. Fed's Clarida speaks, while Fed's Bullard, Harker, Quarles and Williams discuss the Fed Balance Sheet. ECB Draghi features at a low key event. Italy sells bonds.

Currencies: EUR/USD Idled In 1.13 Area As (US & EMU) Data Fail To Give Guidance

Mixed US/EMU data cement EUR/USD stalemate

EMU and US data were mostly mediocre yesterday and didn't provide clear directional guidance for their respective currencies. Initially it looked that the euro could slightly outperform. The EMU composite PMI rebounded modestly. ECB members were not keen to provide concrete guidance on a new TLTRO program. The US durable orders and Philly Fed business outlook also reinforced the feeling that US growth might be over its peak. At first, USD-German interest rate differentials narrowed slightly as EMU yields rose. EUR/USD came within reach of Wednesday's ST top, but a real test didn't occur. Later, a further rise in US yields restored the balance. EUR/USD closed again little changed at 1.1336. USD/JPY also held in well-known territory, closing at 110.70.

Risk sentiment in Asia initially turned more cautious overnight as investors await more concrete news from the US-China trade talks. Japan core inflation (ex fresh food 0.8% Y/Y) rose marginally, but didn't change the prospect for monetary policy or for the yen. USD/JPY is trading near 111.75. EUR/USD is also going nowhere (1.1340 area). The kiwi dollar (NZD/USD 0.6775 area) remains under pressure. The RBNZ indicated that tighter monetary conditions due to higher bank capital requirements, if necessary, might be counterbalanced by a rate cut. Today, there are no US data. In Europe the final German Q4 GDP and German IFO confidence are interesting. Several Fed governors will speak, mostly after the close of European markets. Yesterday, EUR/USD rose temporarily as the EMU PMI's were not that bad. A similar reaction is possible in case of a decent IFO. However, with several ‘global issues' issues still clouding the eco outlook, it is unlikely to kick-start a clear directional EUR/USD move. Fed members speaking the balance sheet is USD wildcard. EUR/USD rebounded off last week lows but euro sentiment remains fragile. Of late, we assumed progress on trade issues and better EMU data are needed for a more protracted EUR/USD comeback. There are hopeful signs on trade, but the jury is still out. EUR/USD 1.1216 marks the Nov low. EUR/USD 1.1187 is 61% retracement (2016 low/2018 top).

The sterling price action more or less followed the tone of the Brexit headlines yesterday. Sterling resilience prevailed, but initial intraday gains evaporated as the hope in a ‘quick' solution was said to be over-optimistic. EUR/GBP closed little changed at 0.8692. This morning's headlines suggested that the EU preparing for a three-month Brexit delay. Of late, markets tended to be positioned for a scenario that a no-deal Brexit could be avoided. This hope helped to put a floor for sterling, despite plenty of Brexit noise. EUR/GBP 0.8621/17 is key MT support.

EUR/USD idled in the mid 1.13 area as (US & EMU) data fail to give guidance

Daily Pivots: (S1) 0.9995; (P) 1.0009; (R1) 1.0028; More....

Intraday bias in USD/CHF remains neutral for the moment. On the upside, above 1.0098 will target 1.0128 first. Break will confirm resumption of up trend from 0.9186. Next target will be 100% projection of 0.9541 to 1.0128 from 0.9716 at 1.0303. However, sustained break of 0.9988 will indicate rejection by 1.0128 and turn intraday bias to the downside for 0.9716 support again.

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.

Daily Pivots: (S1) 1.3009; (P) 1.3052; (R1) 1.3078; More....

GBP/USD is staying in tight range below 1.3109 temporary top. Intraday bias remains neutral first. On the upside, above 1.3109 will target 1.3174/3217 resistance zone. Decisive break there will complete a head and shoulder bottom pattern (ls: 1.2661, h: 1.2391, rs: 1.2773). That would indicate bullish reversal for 61.8% retracement of 1.4376 to 1.2391 at 1.3618 next. On the downside, break of 1.2935 minor support will turn bias back to the downside for 1.2773 instead.

In the bigger picture, focus is back on 1.3174 resistance with current rebound. Break will indicate completion of decline from 1.4376. Rise from 1.2391 would then be seen as the third leg of the corrective pattern from 1.1946 (2016 low). In that case, further rise could be seen through 1.4376 resistance. Nevertheless, rejection by 1.3174 again will extend the decline from 1.4376 through 1.2391 to 1.1946 low.

Investors optimistic about Sino-US talks

A pretty flat open is expected in European markets on Friday, as we wrap up another week one step closer to a US-China trade deal and hopefully one week closer to a Brexit agreement.

With major central banks around the world in a much more accommodative place now compared with a few months ago, these are the two primary concerns for investors at a time when the economic outlook is foggy, to borrow a term from BoE Governor Mark Carney.

There is genuine optimism around the trade talks between the two largest economies, with the latest reports suggesting that they’re at an advanced stage. At the very least then we can expect an extension of the truce and both sides working towards the removal of tariffs, which is a big relief for investors.

The Brexit negotiations on the other hand don’t appear to be going quite as smoothly, although there is a strong sense that there’s a lot of politics being played on both sides which will enable them to drag it out until the last minute and give the impression of a long hard-fought negotiation. How that will play out next week when Theresa May is due to being a deal back for a vote in Parliament will certainly be interesting.

Gold pares gains on resurgent dollar

A rebound in the dollar on Thursday put pressure back on gold which had been heading towards $1,350 but quickly reversed course back towards prior resistance around $1,320. This has offered some support in the near-term and gold continues to look bullish in a favourable environment for the yellow metal.

A resurgent dollar remains the primary headwind for gold but even then we’ve continued to see it make strides higher, albeit at a slower pace. If a more accommodative monetary environment can be matched with dollar softness then this will be very favourable and could accelerate the move higher.

Oil rally stalls just as key resistance breaks

The oil rally has stalled over the last week just as it appeared to break above a key resistance area. A fifth consecutive rise in US inventories won’t be helping the rally in oil prices, with record levels of US output – peaking at 12 million barrels a day this month - a strong contributor to that.

Daily Pivots: (S1) 1.1313; (P) 1.1341; (R1) 1.1361; More.....

EUR/USD is staying in tight range below 1.1371 and intraday bias remains neutral. Further rise is mildly in favor with 1.1275 minor support intact. Rebound fro 1.1234 is seen as another leg in consolidation pattern from 1.1215. On the upside, above 1.1371 will extend the rebound from 1.1234, towards 1.1514 resistance. On the downside, though, break of 1.1275 minor support will turn bias back to the downside for 1.1215 low instead. Decisive break there will confirm completion of consolidation from 1.1215, and resumption of down trend from 1.2555.

In the bigger picture, as long as 1.1814 resistance holds, down trend down trend from 1.2555 medium term top is still in progress and should target 61.8% retracement of 1.0339 (2017 low) to 1.2555 at 1.1186 next. Sustained break there will pave the way to retest 1.0339. However, break of 1.1814 will confirm completion of such down trend and turn medium term outlook bullish.