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The British pound has made a strong move higher against the US dollar, following dovish comments from Federal Reserve member Loretta Mester. The GBPUSD pair is approaching major technical resistance around the 1.3095 level, a move above this level exposes further upside towards the 1.3200 level. A bullish inverted head and shoulders pattern is now visible on the four-hour time frame.

The GBPUSD pair is bullish while trading above the 1.2940 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 1.2940 levels.

The price of crude oil continued its steady climb as investors cheered the supply cuts from OPEC and the US sanctions on Iran and Venezuela. Investors also believe that the demand will be steady, even with the slowing global economy. The price of Brent and WTI crude reached a high of $66.5 and $56.8 respectively. The price increase comes at a time when US production has been increasing. Last week, Baker Hughes revealed that US oil rigs had increased by 4.

The Japanese yen was slightly stronger against the USD in the Asian session. This happened after Japan released important trade data. In January, imports contracted by -0.6%. This was better than the expected contraction of -2.8%. In the same month, exports contracted by -8.4%, which was worse than the consensus estimate of -5.5%. In December, exports decreased by 3.9%. The trade deficit increased to 1,415 billion yen. This deficit will likely change after a few years. This is because many Japanese companies in the EU will likely move back there after the two signed a free trade deal. Already, Honda has announced that it will move from the UK to Japan.

Traders today will focus on the upcoming round of trade negotiations between the US and China. These talks will begin tomorrow in Washington. They will be the final talks before the March 1 deadline. Yesterday, Donald Trump said that he will be flexible on the deadline. They will also focus on the Federal Reserve minutes, which will be released later today. These minutes will help shed light on what the Fed’s thinking.

EUR/USD

On Friday, the EUR/USD pair reached a low of 1.1233. In the past two days, the pair has moved up and yesterday, it reached a high of 1.1356. It is now trading at 1.1345, which is along the 38.2% Fibonacci Retracement level. The price is also above the 42-day and 21-day exponential moving average while the RSI is slightly below the overbought level of 70. While the pair could move lower, the upwards trend could continue in the medium term.

XTI/USD

The price of WTI crude oil reached a low of $42 in December. Since then, the pair has been making higher highs and higher lows and today, it reached a high of $56.50. This was the highest level since November last year. On the daily chart, this level is also along the 38.2% Fibonacci Retracement level. On the daily chart, this price is above all the medium, short, and long-term exponential moving averages. The momentum indicator remains above the 100 level. There is a likelihood that the price will continue moving upwards, with the next resistance level being $60, which is also the 50% Fibonacci level.

USD/JPY

The USD/JPY pair moved slightly higher today after the Japanese trade deficit rose faster than expected. The pair remains within a narrow range. It is now trading at 110.82, which is slightly higher than the 42-day and 21-day EMAs. The TSI has remained between the 30 and 70 levels, which is a sign of consolidation. The pair could make some major moves in either direction in the medium-term.

In our previous article, we have highlighted the possibility that Gold can quickly retest the high in 2018. The chart below shows the yellow metal has broken above a long term bearish channel from Sept 5, 2011 high. In addition, it has successfully closed above the ascending trend support from December 3, 2015 low.

We mention that the next logical swing target for the yellow metal is to retest 2018 high at $1360 area. This level has provided resistance for the past 5 years and thus is a significant level to watch. A decisive break and close above $1360 suggests a more bullish implication with next swing target to as high as $1700. The chart below shows the 5 year rounding bottom formation in Gold

An Elliott Wave analysis of Gold against World Currency Unit (WOCU), a weighted basket of 20 fiat currency pairs covering top 20 world economies, also suggests a breakout

In the chart above, a break above 7.6.2016 high will create 5 swing bullish sequence from 12.30.2013 low and opens up more upside to $1021 – $1160 area.

Gold 1 Hour Elliott Wave Chart

In this article, we will look at the short term 1 hour chart for Gold. The rally from Aug 16, 2018 low is still in progress as an Elliott Wave Impulse structure. We propose the current rally is still within wave (3) from Aug 16, 2018 low as momentum remains strong. Focusing on the shorter cycle, the rally from 1/21/2019 low ($1276.40) is unfolding in 5 waves of lesser degree. Wave ((i)) ended at $1326.30 and wave ((ii)) ended at $1302.16. Wave ((iii)) remains in progress and while short term pullback stays above $1302.11, expect Gold still to extend higher. Caution is warranted once Gold does retest $1360 as this level provides resistance in the past 5 years. We expect the 5 waves up from Aug 16, 2018 low to end between $1360 – $1400.

General Trend:

• Shanghai Composite weighed down by declines in IT and Telecom Services indices
• Australia’s Consumer Staples index drops over 2%, Woolworths declines over 5% post earnings
• Iron ore miner Fortescue rises over 4%, reported H1 results and declared special dividend
• Automakers trade generally higher in Japan, Japanese gov’t said to seek to put together US trade deal parameters before May summit (Japanese press)
• Japan exports decline for second straight month in Jan, exports to China -17.4% y/y
• Japan 2-yr JGB yield trades at lowest level since Nov 2017
• Chinese Yuan (CNY) rises, US officials are reportedly seeking a stable yuan pledge as part of the China trade deal talks (press)
• China PBoC to launch first bill swap operation later today
• Australia 3-year bond yields decline after Q4 wage data
• US Fed minutes due to be released as scheduled on Wed, despite weather advisory in D.C.

Headlines/Economic Data

Japan

• Nikkei 225 opened +0.2%
• 9508.JP President: Considering cutting power bills for households – Nikkei
• (JP) Japan Economy Min Motegi: Currency clause not discussed Sept 2018 with US; talks with US haven't started - speaking in Diet
• (JP) Japan Fin Min Aso: have never directly talked about currency with US Treasury Sec Mnuchin; reiterates currency moves decided by the market -speaking in diet
• (JP) Japan PM Abe: Agreed with Trump not to talk about currencies, currency discussion is in the realm of the MoF - speaking in Diet
• (JP) Bank of Japan (BOJ) Gov Kuroda: Do not believe current BOJ policy is weakening yen, BOJ monetary policy is not targeting yen, believe this is understood by US and other countries - speaking in Diet
• 7203.JP Said to agree to H1 price increase for specialty steel - Japanese Press
• (JP) JAPAN JAN TRADE BALANCE: -¥1.42T V -¥1.03TE; ADJ TRADE BALANCE: -¥369.9B V ¥150.7BE; Exports y/y: -8.4% v -5.7%e (fastest decline since Oct 2016); Imports y/y: -0.6% v
• 3.5%e; Exports to US +6.8% y/y; China -17.4% y/y; Asia -13.1% y/y, Europe -2.5% y/y
• (JP) Japan wants to hash out parameters of US trade deal before summit in May - Nikkei

Korea

• Kospi opens +0.5%
• (KR) Pres Trump: looking forward to a good meeting with North Korea's Kim; I want denuclearization in North Korea, but not in a particular hurry
• (KR) South Korea President Moon: Needs to be increased efforts to further expand bilateral cooperation with India - Yonhap
• South Korea prosecutor has raided offices of Hyundai/Kia quality division in Southern Seoul
• (KR) South Korea industrial city of Uslan Q4 unemployment rate 4.5% v 2.9% prior (Uslan is the highest among eight major cities and nine provinces)

China/Hong Kong

• Hang Seng opens +0.6%; Shanghai Composite opens +0.2%
• (CN) China PBoC to implement CNY1.5B 1-yr bill swap operation today, coupon rate will be 2.45%
• (CN) China PBoC sets Yuan Reference Rate: 6.7558 v 6.7642 prior
• (US) US Senator Portman said he sees 'partial' US/China trade deal by March 1 deadline, expects trade talks to continue past the deadline without Trump raising tariffs on China - HK Press
• (CN) China PBoC Open Market Operation (OMO): Injects CNY20B in 7-day reverse repos v skips prior (1st injection after 7 skips); Net CNY20B injection v nil prior
• (CN) China Top Content Regulator said to have asked local officials to stop submitting new video game licence applications - financial press
• (CN) US officials reportedly seeking a stable yuan pledge as part of China trade deal talks, said to have reached a tentative agreement to include it in trade deal – press
• (US) President Trump: China trade talks are going well; March 1st is NOT a magical date
• (AU) China has recruited the services of former police detectives in Australia and other Western countries to help it recover millions of dollars in alleged "hot money" taken out of the country, called "Project Dragon" - Aussie press
• (CN) China FX Regulator SAFE Deputy Dir Lu Lei: China must address its domestic imbalances to strengthen its ability to weather the impact of external risks such as the trade war with US; rapidly rising household debt is the biggest threat to China's economy - Caixin
• 293.HK Guides FY18 Net ~HK$2.3B v -HK$1.26B y/y, record high; benefited from capacity growth

Australia/New Zealand

• ASX 200 opened +0.1%
• (AU) AUSTRALIA Q4 WAGE PRICE INDEX Q/Q: 0.5% V 0.6%E; Y/Y: 2.3% V 2.3%E
• WOW.AU Reports H1 (A$) Net 979M v 973Me; EBIT 1.53B v 1.5Be; Rev 30.6B v 30.6Be; to return up to A$1.7B in capital to shareholders
• (AU) Australia Treasury Sec: Additional declines in housing prices could weaken consumer spending; commodity prices are higher than at mid-year report; more risk to economic outlook on balance
• FMG.AU Reports H1 Net $644M v $681M y/y; adj EBITDA $1.6B v 1.8BB y/y; Rev $3.54B v $3.68B y/y; declares special dividend of A$0.11
• WOR.AU Reports H1 (A$) underlying Net 98.4M v 78.2M y/y; EBIT 133.9M v 109.3M y/y; Rev 2.65B v 2.41B y/y
• (AU) Australia Jan Skilled Vacancies m/m: 1.3% v 0.7% prior
• (AU) Australia sells A$900M v A$900M indicated in 2.50% May 2030 bonds, avg yield 2.1472% v 2.2814% prior, bid to cover 3.39x v 3.13x prior
• (AU) According to Australia Foreign Investment Review Board China is no longer the largest source of proposed investment in Australia, being surpassed by the US for the first time since 2012/13
• (AU) Some in China and Hong Kong said to be concerned about possible increase in the capital gains tax on property investments in Australia - HK Press
• (NZ) New Zealand Q4 PPI Input q/q: 1.6% v 1.4% prior; PPI Output q/q: 0.8% v 1.5% prior

North America

• (US) President Trump; China trade talks are going well; March 1st is NOT a magical date
• (US) Fed's Williams (moderate, voter): monetary policy is where it ought to be with rates around neutral; new patient Fed stance doesn't mean not hiking rates or that policy is set for all time.
• TSLA Musk: by the end of 2019 annualized production ~500K (10 cars/week); 4000 Tesla cars are loading in San Francisco for Europe - tweet

Europe

• (UK) UK Chancellor of the Exchequer Hammond (Fin Min): 'Malthouse' initiative is a valuable effort to allay backstop concerns in the future
• (UK) 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 - financial press

Levels as of 12:50ET

• Hang Seng +0.8%; Shanghai Composite -0.4%; Kospi +0.9%; Nikkei225 +0.5%; ASX 200 -0.2%
• Equity Futures: S&P500 -0.1%; Nasdaq100 -0.1%, Dax -0.1%; FTSE100 +0.0%
• EUR 1.1335-1.1359; JPY 110.53-110.93; AUD 0.7152-0.7177; NZD 0.6865-0.6886
• Commodity Futures: Gold +0.1% at $1,345/oz; Crude Oil +0.1% at $56.49/brl; Copper +0.1% at $2.88/lb

Market movers today

The main event today will be the release of the FOMC meeting minutes in the US. We will be interested to hear the different stances within the Fed on further hikes now it has hinted it is 'patient' about raising rates again. Furthermore, we will monitor any insights it might have on how it plans the balance sheet reduction.

Potential Brexit news as May meets Juncker in Brussels today. May's camp has played up, whereas Juncker has played down the importance of the meeting.

Selected market news

Market anxiety eases further. European and US equity markets closed essentially flat. Asian bourses are trading up. The S&P 500 closed up 0.15%, which drove down its derived measure of implied volatility, the VIX index to 14.88, which is the lowest level since October 2018. The volatility index is often used as a barometer of market anxiety. Treasury yields fell across the curve with the long end underperforming.

Elections driving trade results. Bernie Saunders announced he will run in the 2020 U.S. presidential race. The beginning of presidential election campaigning is a key driver towards a deal in trade negotiations between the US and China. Incidentally Trump is quoted as saying that the 1 st of March is not a "magical date." The will to a deal is evident. Bloomberg further reported that the US wants the Yuan tied into negotiations, in order to counter potential currency devaluation.

Prime Minister Theresa May heads for Brussels today to deal with Juncker. Her trip follows yet another defeat, as there was no support for her Brexit statement (the hard Brexiteers abstained). While the vote was only indicative and not legally-binding, it has probably made life more difficult for May, as she no longer can show she has a united party behind her. EU is not willing to negotiate and make concessions if they do not know whether it will be sufficient. May has promised another vote by the end of February but she is unlikely to have anything new to bring forward then.

We have to get very close to the 29 March deadline (remember there is an EU summit on 21-22 March) or a small majority in the Commons will force May to ask for an extension of Article 50 by the end of this month. Pressure is rising on all. We stick to our view that the two most likely outcomes are May's deal passing eventually (40%) or a second EU referendum (30%). A no deal scenario would probably only happen "by accident" and we attach a 15% probability to that scenario.

European tier 2 macro prints were mixed. German ZEW expectations edged up from -15.0 to -13.4 in February in a sign of stabilisation. A recession leaden Italy suffered weak industrial orders in December with orders declining -1.8% m/m. The print points to protracted weakness in Q1.

For the 24 hours to 23:00 GMT, the EUR rose 0.24% against the USD and closed at 1.1339.

On the macro front, the Euro-zone's seasonally adjusted current account surplus narrowed to €16.2 billion in December, amid decline in exports and following a revised surplus of €22.6 billion in the prior month. Moreover, the region's ZEW economic sentiment index climbed to a level of -16.6 in February, compared to a reading of -20.9 in the previous month. Meanwhile, the nation's seasonally adjusted construction output slid 0.4% on a monthly basis in December, compared to a revised gain of 0.3%.

Separately, in Germany, the ZEW current situation index eased to a level of 15.0 in February, more than market consensus for a fall to a level of 20.0. The index had registered a level of 27.6 in the previous month. Furthermore, the nation's ZEW economic sentiment index rose to a level of -13.4 in February, following a level of -15.0 in the preceding month. Market participants had envisaged the index to record a reading of -14.0.

The US dollar fell against a basket of currencies yesterday, amid hopes for a trade deal between the US and China.

In the US, data showed that the US NAHB housing market index advanced to a four-month high level of 62.0 in February, surpassing market anticipations for a rise to a level of 59.0 and compared to level of 58.0 in the previous month.

In the Asian session, at GMT0400, the pair is trading at 1.1345, with the EUR trading 0.05% higher against the USD from yesterday's close.

The pair is expected to find support at 1.1295, and a fall through could take it to the next support level of 1.1245. The pair is expected to find its first resistance at 1.1376, and a rise through could take it to the next resistance level of 1.1407.

Looking ahead, traders would await Euro-zone's consumer confidence index for February and Germany's producer price index for January, set to release in a few hours. Later in the day, the US FOMC meeting minutes along with the MBA mortgage applications would pique significant amount of investors' attention.

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

For the 24 hours to 23:00 GMT, the GBP rose 1.06% against the USD and closed at 1.3062, amid hopes that a meeting between UK Prime Minister Theresa May and European Commission President Jean-Claude Juncker would resolve the Irish border issue.

Macroeconomic data indicated that UK's ILO unemployment rate remained steady at a 44-year low rate of 4.0% in the three months ended December 2018, meeting market expectations. Moreover, Britain's average earnings including bonus advanced 3.4% on a yearly basis in the October-December 2018 period, undershooting market consensus for a rise of 3.5%. The average earnings including bonus had registered a similar rise in the September-November 2018 period.

In the Asian session, at GMT0400, the pair is trading at 1.3062, with the GBP trading flat against the USD from yesterday's close.

The pair is expected to find support at 1.2947, and a fall through could take it to the next support level of 1.2831. The pair is expected to find its first resistance at 1.3127, and a rise through could take it to the next resistance level of 1.3191.

Trading trend in the British Pound today, is expected to be determined by UK's CBI total trends orders for February, slated to release in a few hours.

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 declined against the JPY and closed at 110.58.

In the Asian session, at GMT0400, the pair is trading at 110.75, with the USD trading 0.15% higher against the JPY from yesterday's close.

Overnight data indicated that Japan's total trade deficit expanded to ¥1452.2 billion in January, following a revised deficit of ¥56.7 billion in the prior month. Markets had anticipated the nation to post a deficit of ¥1029.0 billion.

The pair is expected to find support at 110.50, and a fall through could take it to the next support level of 110.24. The pair is expected to find its first resistance at 110.97, and a rise through could take it to the next resistance level of 111.18.

Going forward, traders would keep an eye on Japan's Nikkei manufacturing PMI for February, set to release overnight.

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

For the 24 hours to 23:00 GMT, the USD declined 0.32% against the CHF and closed at 1.0013.

Data showed that Switzerland's trade surplus widened to CHF3.04 billion in January, compared to a revised surplus of CHF1.96 billion in the prior month. Market participants had expected the nation to post a surplus of CHF2.24 billion.

In the Asian session, at GMT0400, the pair is trading at 1.0015, with the USD trading slightly higher against the CHF from yesterday's close.

The pair is expected to find support at 0.9991, and a fall through could take it to the next support level of 0.9967. The pair is expected to find its first resistance at 1.0050, and a rise through could take it to the next resistance level of 1.0085.

Amid lack of economic releases in Switzerland today, traders would focus on global macroeconomic events for further direction.

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 0.16% against the CAD and closed at 1.3214.

In the Asian session, at GMT0400, the pair is trading at 1.3194, with the USD trading 0.15% lower against the CAD from yesterday’s close.

The pair is expected to find support at 1.3158, and a fall through could take it to the next support level of 1.3123. The pair is expected to find its first resistance at 1.3255, and a rise through could take it to the next resistance level of 1.3317.

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