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The New Zealand Dollar appreciated about 74 base points against the US Dollar on Tuesday. The currency pair breached both the 50– and 100-hour SMAs during yesterday's trading session.

As for the near future, it is likely that the currency exchange rate edges lower towards the lower boundary of an ascending channel pattern at 0.6840.

Nevertheless, technical indicators demonstrate that the NZD/USD currency pair will gain further strength within this session. If the technical sentiment is correct, the upside target will be at yesterday's high levels of 0.6891.

Notes/Observations

• ECB's Chief Economist Praet noted that General Council to discuss TLTRO in March but was not clear about any decision being made at that time
• South Africa annual inflation moved back below the mid-point of the target range for the 1st time in 7 months
• UK PM May to meet EU's Juncker later today in Brussels - Headline risks from trade talks and Brexit remain
• Fed minutes to be released despite Washington offices closed today due to the weather

Asia:

• Japan Jan Trade Balance registers a larger deficit as exports decline by largest amount in two years (Trade: -¥1.42T v -¥1.030Te; Exports Y/Y: -8.4% v -5.7%e; Imports Y/Y: -0.6% v -3.2%e; speculation that BOJ could add more stimulus

Europe:

• PM May said to be considering plans to bring forward the meaningful vote on her Brexit deal to next week in bid to see off threat of ministerial resignations. Govt now concentrating efforts on agreeing a new legal text stating that the backstop, which would tie Britain to a Customs Union with the EU, cannot be "indefinite'
• UK Chancellor of the Exchequer Hammond (Fin Min): 'Malthouse' initiative a valuable effort to allay backstop concerns in the future. No-deal Brexit would be 'mutual calamity'. EU would not consider replacing the backstop with an alternative now.

Americas:

• President Trump; China trade talks were going well; March 1st was NOT a magical date. China was trying to move fast to avoid having tariffs go up
• US officials said to be seeking a stable yuan pledge as part of the China trade deal talks. US would plan to employ tariffs if China violates yuan pledge.
• Fed's Williams (moderate, voter): monetary policy was where it ought to be with rates around neutral; The new patient-minded Fed stance did not mean not hiking rates or that policy was set for all time

Macro

• (UK) United Kingdom: A spokesman of UK prime minister said that today's meeting between May and the president of the European Commission, Juncker, will be "significant." He confirmed that May will be looking for a legally binding concession on the Irish backstop. A vote is due to take place in parliament next Wednesday 27th February. Assuming May is unsuccessful today, we think there would realistically be only two ways forward: either a cross-party compromise, which likely cause an irrevocable split in May's Tory party, or a new referendum. A delay in Brexit is starting to look inevitable.
• (EU) Eurozone: The ECB's Chief Economist Praet said they will discuss TLTROs in March, but there is no decision yet. He highlighted that business climate in the Euro area "seems to be changing in a more fundamental way", adding that "we are not in a viscous circle, but we are close to that". Considering that that the he is responsible for compiling the initial presentation of the overall outlook it is pretty clear in which direction he is leaning and what the recommendation will likely be.
• (JP) Japan: January exports fell -8.4% in January following the -3.9% y/y fall in December. Imports also fell -0.6% y/y in January following a 1.9% gain in December. The trade deficit thus widened to a 5 year high. The data then is consistent with escalating concern that exports will be impacted this year by global trade frictions and the slowing in China's economy.

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +0.09% at 369.32, FTSE +0.05% at 7,182.75, DAX +0.24% at 11,336.73, CAC-40 -0.01% at 5,160.23, IBEX-35 +0.26% at 9,160.19, FTSE MIB -0.25% at 20,178.50, SMI +0.50% at 9,305.50, S&P 500 Futures -0.12%]

Market Focal Points/Key Themes:

Equities

• European Indices trade higher across the board following a mostly higher session in Asia overnight and slightly lower US futures. On the corporate front shares of French Airliner Air France trades higher after initially trading down 5% after a fall in profits; Iberdrola also trades higher on an earnings beat. Other notable risers include SimCorp, VolkerWessels, Fresenius SE, Lloyds, and Wolters Kluwer after earnings. To the downside McBride sheds over 30%, with Gooch & Housego dropping 20% after profit warnings. Senvio, Intu Properties, Nexity and Telefonica Deutscheland are among other names trading lower on earnings and outlook. In other news Sainbury's shares trade sharply lower after the UK CMA said it could block the merger with Asda if its concern's can't be addressed. Low cost airliner Flybe trades almost 100% higher after receiving an online contingency proposal from an investor group. Looking ahead notable earners include CVS Health, Sonic Automotive, Targa Resources, Intelsat, Garmin and HollyFrontier among others.
• Consumer discretionary: Sainsbury PLC [SBRY.UK] -13%, WM Morrison Supermarkets [MRW.UK] -4%, Tesco [TSCO.UK] +0.5% (UK CMA provisional findings on Sainsbury's merger), Air France-KLM [AF.FR] -2% (earnings), Wolters Kluwer [WKL.NL] +2% (earnings), McBride Plc [MCB.UK] -32% (profit warning), Flybe [FLYB.UK] +99% (capital injection), Norwegian Air [NAS.NO] -38% (HBK to sell 10.4M subscription rights at NOK 15.01/shr)
• Energy: Senvion [SEN.DE] -16% (profit warning)
• Financials: Lloyds Banking Group [LLOY.UK] +3% (earnings; share buyback), Swedbank [SWEDA.SE] -7% (response to Danske claim)
• Healthcare: Fresenius SE [FRE.DE] +5% (earnings), Fresenius Medical Care [FME.DE] +5.5% (earnings)
• Industrials: Iberdrola [IBE.ES] +2.5% (earnings), MTU Aero Engines Holding [MTX.DE] -1.5% (earnings)
• Technology: SimCorp [SIM.DK] +10% (earnings; share buyback), Gooch & Housego [GHH.UK] -20% (profit warning)
• Materials: Glencore [GLEN.UK] +1% (earnings; share buyback)

Speakers

• ECB's Praet (Belgium, chief economist): Key assessment for March and beyond would be whether the medium term outlook had changed. Appeared that the economic climate had changed for the negative with the change being more fundamental rather than transitory. Normalization of ECB instruments was not policy tightening. ECB looks very much at bank's balance sheets added that its TLTRO program was very generous. Bank lending appeared to be fine for the time being; might not make a TLTRO decision at the March meeting
• Italy Dep PM Salvini reiterated that view to rule out any budget adjustment for 2019
• UK Foreign Min Hunt: if we solve backstop we could pass the Brexit deal in Parliament. Must do all we can to avoid a no-deal Brexit. The March 29th deadline was important; open question whether Brexit extension solved the problem
• IMF's Lagarde: IMF was likely to lower its growth outlook for Germany (**Note: currently sees 2019 growth at 1.35)
• Sweden National Debt Office (Riksgälden): central government finances to weaken in the coming years as the economy slowed down
• Russia President Putin annual State of the Nation address stressed the need to ensure high pace of economic growth; GDP should exceed 3.0% by 2021. FX reserves now covered external debt for the 1st time
• China Foreign Ministry Spokesperson Geng reiterated govt view that China did not engage in competitive devaluation of its yuan currency (CNY), hoped the US did not politicize the currency issue

Currencies/Fixed Income

• EUR/USD was slightly higher and back within its recent 6-month trading range between 1.13-15 area. Germany Jan PPI data showed a improvement month-over-month
• GBP/USD was slightly softer by 0.2% at 1.3035 area to move off recent 2-week highs. The focus was on the upcoming talks between UK Pm May and EU Commission President Juncker
• The USD/CNY was at a multi-week low as US-China trade talks continued. Trump has expressed flexibility with a March 1 trade-deal deadline but the US sought a stable yuan to be part of any agreement

Economic Data

• (NL) Netherlands Feb Consumer Confidence Index : -2 v +1 prior
• (NL) Netherlands Dec Consumer Spending Y/Y: 2.3% v 2.3% prior
• (DE) Germany Jan PPI M/M: +0.4% v -0.1%e; Y/Y: 2.6% v 2.2%e
• (DK) Denmark Feb Consumer Confidence Indicator: 3.3 v 4.1e
• (TR) Turkey Feb Consumer Confidence Index: 57.8 v 58.5 prior
• (JP) Japan Jan Convenience Store Sales Y/Y: 0.8% v 1.2% prior
• (ZA) South Africa Jan CPI M/M: -0.2% v +0.1%e; Y/Y: 4.0% v 4.3%e
• (ZA) South Africa Jan CPI Core M/M: 0.2% v 0.3%e; Y/Y: 4.4% v 4.5%e
• (SE) Sweden Q4 Industry Capacity: 90.4% v 91.0% prior
• (PL) Poland Jan Sold Industrial Output M/M: 7.4% v 5.0%e; Y/Y: 6.1% v 3.7%e
• (PL) Poland Jan PPI M/M: 0.2% v 0.1%e; Y/Y: 2.2% v 2.1%e

Fixed Income Issuance

• (IN) India sold total INR100B vs. INR100B in 3-month, 6-month and 12-month bills
• (DK) Denmark sold total DKK2.60B in 2023 and 2029 DGB bonds

Looking Ahead

• 05:30 (DE) Germany to sell €4.0B in 0% Apr 2024 BOBL
• 05:30 (PT) Portugal Debt Agency (IGCP) to sell €1.0-1.25B in 3-month and 12-month Bills
• 06:00 (UK) Feb CBI Industrial Trends Total Orders: -5e v -1 prior; Selling Prices: 16e v 18 prior
• 06:00 (SE) Sweden Central Bank (Riksbank) Dep Gov Floden
• 06:00 (CZ) Czech Republic to sell €100M in 0% Feb 2022 bonds
• 06:00 (RU) Russia OFZ Bond auction results (3 tranches)
• 06:45 (US) Daily Libor Fixing
• 07:00 (US) MBA Mortgage Applications w/e Feb 15th: No est v -3.7% prior
• 07:00 (ZA) South Africa Fin Min budget speech (clarity on plans to rescue ESKOM)
• 07:45 (US) Weekly Chain Store Sales data
• 08:00 (UK) Baltic Dry Bulk Index
• 08:55 (US) Weekly Redbook Retail Sales data
• 09:00 (BE) Belgium Feb Consumer Confidence Index: No est v -6 prior
• 09:00 (IT) Italy Fin Min Tria in lower House
• 10:00 (EU) Euro Zone Feb Advance Consumer Confidence: -7.7e v -7.9 prior
• 11:30 (US Treasury to sell 2-Year Floating Rate Notes Reopening
• 13:10 (US) Fed's Kaplan (dove, non-voter)
• 14:00 (US) FOMC Jan Minutes
• 14:30 (UK) PM May to meet with EU's Juncker
• 16:30 (US) Weekly API Oil Inventory data
• (AR) Argentina Jan Budget Balance (ARS): No est v -135.3T prior
• (MX) Citibanamex Survey of Economists

The US dollar is increasing bullish pressure against the Japanese yen currency, with buyers edging price closer to the important 111.00 level. A sustained break above the current monthly trading high will likely trigger technical buying towards the USDJPY pairs 200-day moving average, at 111.40. The four-hour time frame also shows a rising price channel, with the channel top offering further resistance at the 112.30 level.

The USDJPY pair is bullish while trading above the 110.80 level, key technical resistance is found at the 111.12 and 111.40 levels.

If the USDJPY pair trades below the 110.80 level, sellers may test towards the 110.40 and 110.24 support levels.

Buyers continue to drive the euro higher against the US dollar, with the pair approaching a major technical breakout above the 1.1370 level. Price-action has also turned more bullish, with dip-buying now seen on any technical pullbacks in the short-term. The release of the Federal Reserve Open Market Committee meeting minutes later today is likely to be a major directional driver for the EURUSD pair.

If the EURUSD pair moves above the 1.1370 level, buyers may test towards the 1.1410 and 1.1450 resistance levels.

Technical failure before the 1.1370 level may provoke technical selling towards the 1.1337 and 1.1300 support levels.

The EUR/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.13083
Open: 1.13398
% chg. over the last day: +0.26
Day's range: 1.13315 – 1.13560
52 wk range: 1.1214 – 1.2557

EUR/USD started to grow again. Yesterday the instrument updated the local maximums. The demand for USD is weakened due to the FOMC Minutes publication, which might point to the change in the Federal Reserve`s monetary policy. Earlier they had claimed that they are not going to increase the key interest rates this year but will keep an eye on the future reports.

The latest economic releases on inflation and retail were rather weak. The USD index has a potential for further correction. Keep an eye on the trading negotiations between the US and China and open positions from the key levels — 1.1300-1.13550.

At 21:00 (GMT+2:00) the US will publish the FOMC Minutes. Watch closely the rhetorics and comments made by the Federal Reserve representatives.

The price fixed above 50 MA and 200 MA, which points to the power of the buyers.

The MACD histogram is in the positive zone but below the signal line, which gives a weak signal to buy EUR/USD.

The Stochastic Oscillator is near the oversold zone, the %K line is crossing the %D line. There are no signals at the moment.

Trading recommendations

Support levels: 1.13300, 1.13000, 1.12800
Resistance levels: 1.13550, 1.13800, 1.14000

If the price fixes above 1.13550, expect the quotes to recover toward 1.13800-1.14000.

Alternatively, the quotes can fall toward 1.13000-1.12800.

The GBP/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.29185
Open: 1.30605
% chg. over the last day: +1.05
Day's range: 1.30271 – 1.30764
52 wk range: 1.2438 – 1.4378

GBP/USD is in the middle of an aggressive buy-out, despite the weak Labour Market reports. The quotes grew by 150 points and updated the key extremums. The demand for GBP grew due to renewed hope in Theresa May`s Brexit negotiations. At the same time, the experts suppose that this growth is caused by the technical factors.

GBP/USD has the potential for further recovery. You should open positions from the current support and resistance levels of 1.30250 and 1.30750.

The Economic News Feed for 20.02.2019 is calm.

The price fixed above 50 MA and 200 MA which points to the power of the buyers.

The MACD histogram is in the positive zone but below the signal line which gives a weak signal to buy GBP/USD.

The Stochastic Oscillator is near the oversold zone, the %K line is below the %D line, which gives a weak signal to buy GBP/USD.

Trading recommendations

Support levels: 1.30250, 1.29800, 1.29400
Resistance levels: 1.30750, 1.31000

If the price fixes above 1.30750, expect the quotes to grow toward 1.31000-1.13300.

Alternatively, the quotes can fall toward 1.29800-1.28500.

The USD/CAD currency pair

Technical indicators of the currency pair:

Prev Open: 1.32364
Open: 1.32117
% chg. over the last day: -0.24
Day's range: 1.31828 – 1.32162
52 wk range: 1.2248 – 1.3664

USD/CAD quotes are showing a negative trend. Yesterday they updated the local minimums. The demand for USD fell before the FOMC Minutes publication.

USD/CAD has a potential for further descend, since CAD is additionally supported by the bullish oil quotes. You should open positions from the key levels: 1.31850 and 1.32150.

The Economic News Feed for 20.02.2019 is calm.

The price fixed below 50 MA and 200 MA, which points to the power of the buyers.

The MACD histogram is in the negative zone and keeps descending, which points to the further fall of the USD/CAD quotes.

The Stochastic Oscillator is in the neutral zone, the %K line is below the %D line, which give a signal to sell USD/CAD.

Trading recommendations

Support levels: 1.31850, 1.31500, 1.31000
Resistance levels: 1.32150, 1.32300, 1.32600

If the price fixes below 1.31850, expect the quotes to fall toward 1.31500-1.31300.

Alternatively, the quotes can fall toward 1.32300-1.32500.

The USD/JPY currency pair

Technical indicators of the currency pair:

Prev Open: 110.592
Open: 110.607
% chg. over the last day: +0.02
Day's range: 110.524 – 110.821
52 wk range: 104.56 – 114.56

USD/JPY is showing and ambiguous technical picture. The quotes are consolidating. The safe haven currency remains under pressure due to the comments by the Head of the Bank of Japan. The offical stated, that they are ready to increase the economic stimuli, if the strengthening of yen is going to prevent the economic stability of the country. Right now USD/JPY is testing the local support and resistance at 110.650 and 110.900. You should open positions from these levels.

The Economic News Feed for 20.02.2019:

The price fixed above 50 MA and 200 MA which points to the power of the buyers.

The MACD histogram is in the positive zone and above the signal line, which gives a weak signal to buy USD/JPY.

The Stochastic Oscillator is in the neutral zone, the %K line is below the %D line which points to a bearish mood.

Trading recommendations

Support levels: 110.650, 110.450, 110.250
Resistance levels: 110.900, 111.100, 111.500

If the price fixes above 110.900 resistance, you should look for the market entry points to open long positions. The movement will tend toward 111.200-111.400.

Alternatively, the quotes can fall toward 110.450-110.250.

UK Prime Minister Theresa May is heading back to Brussels for what we see as a way to collect air-miles. There is zero evidence that anything has changed on either side of Brexit: concessions from the EU are highly unlikely. As Brexit nears, UK manufacturers are stockpiling supplies and slowing production in expectations of cuts in orders. While politicians and investors seem oblivious to the risks of Brexit, main street is fully aware. We see rallies in GBP as opportunity to reload shorts.

Otherwise, markets are feeling sunny. US tariffs on Chinese imports are anticipated not to increase from 10% to 25% in March. The general risk-on environment in equities, commodities and currencies is driven by less-discouraging Chinese economic data and optimistic reports for this week’s round of US-China trade negotiations.

South African rand faces risk

The South African rand remains under heavy pressures, as investors are worried. Today’s budget announcement will be closely watched. Among the three major rating agencies, only Moody’s maintains the investment grade rating to government debt. Both S&P and Fitch downgraded to junk in 2018 due to political turmoil and poor mid-term budget report in 2017. Still, restructuring of the indebted energy department could help, if constructive solutions are put forward. General elections 8 May remain a big unknown. President Cyril Ramaphosa barely has had time to make his mark, and his support within the parliament and the African National Congress party remain thin.

According to the South African Reserve Bank (SARB), no interest rate cuts are likely. Following the first rate hike in more than two years of November 2018, SARB is not ready for further tightening. The economy is expected to have expanded less than 1% in 2018 (estimated at 0.70%) while annual inflation figures, given at 4% in January (prior: 4.30%) and lowest for 11 months, suggest a moderation due to weakening oil prices and a stronger rand. Risks of a sharp drop in private consumption and weakening economic sentiment are rising. We favour long USD/ZAR positions. Currently trading at 14.1020, USD/ZAR is heading along 14.1450 short-term.

Yesterday, the US dollar weakened against a basket of currency majors. The dollar index (#DX) updated local lows and closed in the negative zone (-0.45%). At the moment, the US currency is being traded without a clear dynamic, as financial market participants took a wait-and-see position before publication of the FOMC meeting minutes. Earlier, the Fed said it would not hasten to increase the interest rates in the current year. Also, investors are closely monitoring the negotiations between the US and China. According to the US President, the negotiations are succeeding, despite the fact that the United States has previously accused China of unfair trading practices. In turn, the representatives of China demanded that the US respect China's right to development and prosperity.

It became known that the British Prime Minister went to Brussels with the intention to renegotiate Brexit deal. The insurance policy will be the key issue, which will prevent extensive border controls between the EU member state Ireland and the British province of Northern Ireland. In general, this news has improved investors’ sentiment, and the British pound has strengthened significantly against the US currency despite the weak economic statistics. Thus, the average wage level, including bonuses, fell to 3.4% in December instead of 3.5% in the UK. The number of jobless claims rose to 14.2K in January, while experts expected 12.3K.

The "black gold" prices are moving in different directions. At the moment, futures for the WTI crude oil are testing the mark of $56.50 per barrel.

Market Indicators

• Yesterday, the bullish sentiment was observed in the US stock market: #SPY (+0.17%), #DIA (+0.06%), #QQQ (+0.20%).
• The 10-year US government bonds yield is at 2.64-2.65%.

The news feed on 20.02.2019:

• publication of the FOMC meeting minutes at 21:00 (GMT+2:00).

The GBP/USD seems to have completed a wave B (blue) retracement and started a bullish wave C (blue) as long as price does not show strong bearish impulsive price action.

The GBP/USD bearish breakout below the 61.8% Fibonacci level of wave 4 v 3 and the support zone (blue box) could indicate that price has made a bullish ABC pattern rather than a 123 count. A bullish bounce however at the Fibonacci levels of wave 4 vs 3, such as the 38.2%, could confirm a bullish continuation higher towards the Fibonacci targets of wave 3 vs 1.

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.

The USD weakened against a number of its counterparts yesterday as the American session opening delivered a substantial hit to the greenback. Analysts point out that the USD is weighed by dropping US yields as well as attempts to price in the release of FOMC ‘s meeting minutes today. The document is expected to be scrutinized, for any further clues regarding the bank's discussion for the replacement of the “gradual increases” wording, with “patience”, which was considered as dovish. We would place more weight on any insight regarding what conditions the bank requires in order to decide its next rate movement. Also any comments regarding inflation and the balance sheet normalization would be of interest. The USD could remain under some pressure for the short term as it is considered a rather slow week and US-Sino fundamentals could also weaken its role as a safe haven. EUR/USD rallied yesterday, breaking back and forth the 1.1345 (R1) resistance line, thus stabilising at that level. Should the USD weaken even further today ahead of the release of FOMC's meeting minutes, we could see the pair trading in bullish market. If the pair finds fresh buying orders along its path, we could see the pair breaking the 1.1345 (R1) and aim if not break the 1.1385 (R2) resistance level. Should on the other hand, the pair come under the market's selling interest, we could see the pair aiming if not breaking the 1.1300 (S1) support level.

GBP strengthens yet Brexit uncertainty remains.

The pound strengthened yesterday as strong UK employment data were released and hopes grew for further developments on Brexit. Analysts point out that the UK government seems to be more realistic in renegotiating Brexit and that the markets may place more hopes on further progress. UK's Theresa May is to meet with EU Commission president Juncker today, enhancing efforts to get the Brexit deal through UK parliament. EU officials seem to be willing to work towards a solution, yet remain reluctant for reopening the agreement and setting a time limit to the Irish backstop. We expect the pound to remain Brexit driven, especially as no further major UK financial releases are expected. Cable rose yesterday breaking the 1.2960 (S1) resistance line (now turned to support) and tested the 1.3070 (R1) resistance line. Should hopes for an agreed Brexit grow further, say for example due to any positive headlines about the issue reeling in from Brussels, we could see the pair rising further. If the bulls maintain control of the cable's direction, we could see the pair breaking the 1.3070 (R1) resistance line and aim for the 1.3170 (R2) resistance level. Should on the other hand the bears take over, we could see the pair aiming if not breaking the 1.2960 (S1) support level.

Today's other economic highlights

During the European session today, we get Germany's PPI growth rate for January, while in the American session, we get Eurozone's preliminary consumer confidence indicator for February and from the US the API weekly crude oil inventories figure. As for speakers, please note that ECB's chief strategist Peter Praet speech today, as well as Dallas Fed president Robert Kaplan's ahead of the release of FOMC's meeting minutes.

GBP/USD H4

Support: 1.2960 (S1), 1.2830 (S2), 1.2710 (S3)
Resistance: 1.3070 (R1), 1.3170 (R2), 1.3270 (R3)

EUR/USD H4

Support: 1.1300 (S1), 1.1260 (S2), 1.1215 (S3)
Resistance: 1.1345 (R1), 1.1385 (R2), 1.1420 (R3)