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Daily Pivots: (S1) 1.1292; (P) 1.1324; (R1) 1.1374; More.....

Intraday bias in EUR/USD remains mildly on the upside at this point. Rise from 1.1234 is another rising leg in the consolidation pattern from 1.1215. Further rally could be seen 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.

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.

Daily Pivots: (S1) 1.2948; (P) 1.3011; (R1) 1.3126; More....

GBP/USD retreats mildly after hitting 1.3076. But intraday bias stays on the upside for 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.

Dollar and Yen recover mildly today but remains the two weakest for the week. For now, there is little news regarding the US-China trade talks in Washington. Focus will turn to minutes of January 29/30 FOMC meeting first. There Fed made a drastic turn and declare it will be "patient as it determines what future adjustments". Since then comments from Fed officials suggest that some of them, like New York Fed John Williams, viewed current 2.25-2.50% as being at the lower end of neutral. The minutes today will likely reinforce this message.

Elsewhere in the currency markets, Sterling turns softer on news that three Conservative lawmakers quit the party. And expectation of Prime Minister Theresa May's visit to Brussels is rather low. Though, the Pound is still the strongest one for the week. At the time of writing, Canadian Dollar is the strongest one for today, followed by Swiss Franc and then Euro.

In other markets, DOW future is currently down -37pts. FTSE is up 0.11%. DAX is up 0.30%, CAC is up 0.18%. German 10-year yield is down -0.0117 at 0.095. Earlier in Asia, Nikkei rose 0.60%. Hong Kong HSI rose 1.01%. China Shanghai SSE rose 0.20%. Singapore Strait Times rose 0.57%. Japan 10-year JGB yield dropped -0.0076 to -0.037.

Sterling mildly lower as three Conservatives quit over disastrous handling of Brexit

In UK, three Conservative lawmakers announced to quit the party today, for "this government's disastrous handling of Brexit." Heidi Allen, Anna Soubry and Sarah Wollaston complained that "we no longer feel we can remain in the party of a government whose policies and priorities are so firmly in the grip of the ERG and DUP"

Prime Minister Theresa May's position ahead of the crucial Brexit meaningful vote appeared to be weakened. Together with coalition DUP, May only has a working majority of 7 seats. However, the three are seen as defects who've often voted against the Brexit plan. Thus, their votes couldn't be counted on anyway.

May said she's "saddened by this decision". But she reiterated that "by delivering on our manifesto commitment and implementing the decision of the British people we are doing the right thing for our country. And in doing so, we can move forward together towards a brighter future."

ECB to consider new TLTRO according to Praet

ECB Chief Economist Peter Praet indicated that a new round of Targeted Long-Term Refinancing Operation will be considered in the March meeting. He noted that banks suffering from weak profitability might cut credit to the real economy due to recent slowdown. And new TLTRO could be a handy insurance policy should uncertainty feeds into businesses.

He said that "the discussion will come very soon in the Governing Council," but "it doesn't mean we'll take decisions … at that time." He added that the parameters of any new loans will involve complicated discussions as " it depends on the amount of stimulus you want to bring or not to bring.

On the data front

German PPI rose 0.4% mom, 2.6% yoy in January, above expectation of -0.1% mom, 2.2% yoy. Australia wage price index rose 0.5% qoq in Q4, below expectation of 0.6% qoq. Westpac leading index was unchanged mom in January. New Zealand PPI output slowed to 0.8% qoq in Q4 versus expectation of 1.1% qoq. PPI input rose to 1.6% qoq, above expectation of 1.0% qoq.

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.2948; (P) 1.3011; (R1) 1.3126; More....

GBP/USD retreats mildly after hitting 1.3076. But intraday bias stays on the upside for 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.

Economic Indicators Update

Stocks are poised to open modestly lower, while the dollar is barely firmer against its major trading partners as trade talks continue and ahead of the release of the Fed’s minutes.  As we approach the tail end of earnings season, financial markets have firmly priced in a soft first quarter, that could go negative and reduced the earnings growth for the year to around 5%.

• CNY- Trade talks to pickup by end of week
• Fed- Minutes to provide clarity on how dovish the Fed has become
• GOLD – Higher on inversion concerns
• OIL – Stuck near 3-month highs

CNY

Every day that passes news aspects of the trade deal are discussed, with the consensus remaining that a deal will get done and that global growth concerns should get a reprieve.  Negotiations are toughening and while the US is asking for everything including the kitchen sink, constructive progress appears to be the direction both sides are set on.

Fed

Today’s Minutes may provide more clarity on how dovish the Fed has become.  Investors will eagerly await further clarity on what will be the Fed’s next move, the Fed funds futures markets have recently switched from pricing in a rate hike to a slight preference the next move will be a rate cut.

Another key policy tool is Quantitative Tightening (QT) which is taking excess balances off the Fed’s the balance sheet, while banks are reducing excess reserves at similar pace.  Currently the effects of QT to the credit markets appear limited, but if the Fed does not provide clearer guidance on when it will end, we could this become a strain on the economy.

Gold

Gold hit a 10-month high ahead of building concerns that the Fed’s meeting minutes could signal interest rate increases should not be ruled out for the rest of the year, signalling that the bond market could see the difference between two-year and 10-year Treasury yields narrow.  Recession concerns are likely to grow if we see expectations grow that the US economy is on sound footing and that the Fed could resume rate hikes.  Global growth concerns may ease on the announcement of a trade deal with the US and China, but that may be the straw that break’s the US economy’s back, giving the Fed the go-ahead to raise rates and triggering the yield curve inversion.

Oil

Crude prices remain near the 3-month highs, relatively stuck in no-man’s land as energy traders await further developments in the US-China trade war and to see if the OPEC led production cuts will continue to outweigh rising production from the US.  The standoff in Venezuela is also showing no signs of easing as the Venezuela military remains loyal to President Maduro, ignoring President Trump’s request to their abandon support.

The DAX index has edged higher on Wednesday. Currently, the DAX is at 11,354, up 0.40% on the day. On the fundamental front, there are no major German or eurozone events. German PPI rebounded with a gain of 0.4%, beating the estimate of -0.2%. Later in the day, eurozone consumer confidence is expected to post a second straight loss of -8 points. In the U.S., investors will be keeping a close eye on the Federal Reserve minutes from the January meeting. Thursday promises to be busy, as Germany and the eurozone will publish service and manufacturing PMIs.

The DAX has held its own in February, as appetite remains steady. At the same time, there are growing concerns about the strength of the German and eurozone economies, as recent key numbers have been lukewarm. The well-respected ZEW economic sentiment surveys remain deep in negative territory, and the February readings underscored the fact that investors and analysts are pessimistic about the economic outlook. Still, there was a silver lining in the German release, as the readings have improved steadily over the past four months – back in October, the score was -24.7 points. In the first quarter of 2018, the readings were in positive territory, as the German economy was performing well. However, optimism then dissipated, as the global trade war intensified and the German economy slowed. It has been a similar story with the eurozone, as ZEW economic sentiment scores have been in negative territory since the second half of 2018. If German numbers remain soft in the first quarter, investor sentiment could sour and send the DAX downwards.

Investors are keeping a close look at U.S-China trade talks, which continue this week in Washington. This is be the fourth round of talks, as the sides look to ease trade tensions after months of tit-for tat tariffs which have hurt global growth and rocked the stock markets. Treasury Secretary Steven Mnuchin joined the talks last week and called the negotiations “productive”. The U.S. has threatened to impose stiff new tariffs on March 1, but on Tuesday, President Trump said that the talks were going well and that March 1 was not a “magical day”. If the March 1 deadline is removed, traders can expect the equity markets to respond with strong gains.

Entering into US session, Sterling pares back some of this week's gain on news that three Conservative lawmakers quit the party. And expectation of Prime Minister Theresa May's visit to Brussels is rather low. Though, New Zealand Dollar is the worst performing one today. Yen is also among weakest as weighed down by extending risk appetite. On the other hand, Canadian Dollar is the strongest one, followed by Swiss Franc. Focus will now turn to FOMC minutes.

Over the week, Sterling remains the strongest one despite today's retreat. Canadian Dollar is the second strongest, followed by Swiss Franc. Yen is the weakest one followed by Kiwi and then Dollar.

In Europe, currently:

• FTSE is up 0.17%.
• DAX is up 0.37%.
• CAC is up 0.27%.
• Germany 10-year yield is down -0.0086 at 0.098.

Earlier in Asia:

• Nikkei rose 0.60%.
• Hong Kong HSI rose 1.01%.
• China Shanghai SSE rose 0.20%.
• Singapore Strait Times rose 0.57%.
• Japan 10-year JGB yield dropped -0.0076 to -0.037.

In UK, three Conservative lawmakers announced to quit the party today, for "this government's disastrous handling of Brexit." Heidi Allen, Anna Soubry and Sarah Wollaston complained that "we no longer feel we can remain in the party of a government whose policies and priorities are so firmly in the grip of the ERG and DUP"

Prime Minister Theresa May's position ahead of the crucial Brexit meaningful vote appeared to be weakened. Together with coalition DUP, May only has a working majority of 7 seats. However, the three are seen as defects who've often voted against the Brexit plan. Thus, their votes couldn't be counted on anyway.

May said she's "saddened by this decision". But she reiterated that "by delivering on our manifesto commitment and implementing the decision of the British people we are doing the right thing for our country. And in doing so, we can move forward together towards a brighter future."

Sterling appears to weaken mildly after the news.

EURJPY is trading slightly below the 50% Fibonacci retracement level of the downleg from 133.10 to 118.57, around 125.85, surpassing the bullish crossover of the 20- and 40-simple moving averages in the 4-hour chart. The pair has been struggling in an upward sloping channel since January 15 with the technical indicators remaining in the positive area. The RSI is pointing marginally up, while the MACD stands above trigger line.

If the market pushes the pair higher, the price could re-challenge the immediate 50.0% Fibonacci level and the 125.95 resistance area. More advances would likely open the door for the 127.10 resistance, taken from the highs on December 27, erasing the bullishly aligned range.

On the other hand, if the market moves lower in the near term, the pair could touch the 40-SMA and the mid-level of the Bollinger band around 125.00. In case of an extension below this region, the pair could challenge the lower channel line near 124.40. Slightly below this line, the 38.2% Fibonacci of 124.10 could attract attention as well.

Concluding, in the longer timeframe, the price remains in a strong bearish structure following the pullback on 133.10 and only an advance above the 61.8% Fibonacci near 127.60 could confirm a bullish correction mode.

The Australian dollar eased on Wednesday after repeated failure at 0.7174 barrier (daily Kijun-sen/50% retracement of 0.7295/0.7054).

The downside was for now protected by broken 55SMA (0.7149) but deeper pullback cannot be ruled out as stochastic is reversing from overbought territory and bearish momentum continues to strengthen.

Dips below 55SMA would risk extension towards 10SMA (0.7111) which marks pivotal support and needs to hold to keep bullish near-term bias.

Sustained break above 0.7147 pivot would open way for extension towards 0.7203 (Fibo 61.8%) and 0.7245 (6 Feb high).

Markets focus today's FOMC minutes and Australian jobs data, due early Thursday for fresh signals, as well as the news about the progress of US/China trade talks

Res: 0.7174, 0.7203, 0.7245, 0.7264
Sup: 0.7149, 0.7137, 0.7111, 0.7071

The Euro holds firm tone and probes again above cracked Fibo barrier at 1.1341 (38.2% of 1.1514/1.1234) after bulls failed to close above on Tuesday.

Fresh attempts higher remain capped by 20SMA (1.1362) for the second day and keep in play risk of recovery stall.

North-heading momentum and 5/10SMA bull-cross support, while plethora of daily MA’s (20,30,55,100) continues to weigh along with overbought stochastic and offsets positive signals.

Near-term action may hold in quiet mode ahead of today’s key event, release of minutes of FOMC Jan policy meeting, due later today.

Dovish tone could be expected from Fed as the central bank already sidelined any action in increasing interest rates in 2019, with weaker than expected US retail sales and IP data, released earlier this month, adding to concerns that the US economy would be able to continue to hold positive stance.

On the other side, the single currency showed mild reaction on negative CA data on Tuesday and would also look for fresh signals from series of EU members PMI data on Thursday.

Extended dips would be allowed down to 10SMA (1.1309) to keep bullish bias in play, while close below would generate fresh bearish signal.

Bullish scenario requires close above Fibo barrier at 1.1341 and break through 20SMA (1.1362) to signal further advance.

Res: 1.1362, 1.1374, 1.1382, 1.1397
Sup: 1.1331, 1.1309, 1.1275, 1.1249