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The price of crude oil was little moved in morning trading. This comes after last week’s rally that saw the commodity reach a three-year high. The reason for the rally is the perceived increase in demand coupled by supply cuts by OPEC. At the same time, investors have already priced-in increasing supplies from the United States. On Friday, a report by Baker Hughes said that oil rigs had increased from 854 to 857. This was a continuation of a trend that started in 2016.

The markets will see a slowdown in volumes today as US investors will be away from the market as they celebrate George Washington’s birthday. Investors will also receive limited data from around the world. The most important will be the monthly report by the German central bank which will give investors much-needed insight into the German economy. It will also include German views on international macro issues. In recent months, data from Germany has shown that the economy is softening with PMI and trade numbers at historic lows.

The Japanese yen was little moved today after the release of mixed economic numbers. The core machinery orders rose by an annualized rate of 0.9% in December. This was lower than the expected 4.8%. In November, the orders rose by 0.8%. On a MoM basis, the orders contracted by -0.1%, which was better than the expected contraction of -1.1%. In recent months, the Japanese economy has shown signs of slowdown.

EUR/USD

On Friday, the EUR/USD pair reached a low of 1.1233 and started moving up. Today, the pair edged up slightly and is currently trading at 1.1315. On the hourly chart, the pair is above the 21-day and 42-day EMA while the RSI has moved to almost the overbought level of 70. It is also between the 23.6% and 38.2% Fibonacci Retracement level. Today, there is a likelihood that the pair will remain within these levels since traders don’t expect any major news.

XBR/USD

The price of Brent crude oil remained along the three-month high level. The XBR/USD pair is now trading at the 66.17 level. On the daily chart, the pair is trading at a price above the 21-day and 42-day exponential moving averages. The RSI has moved closer to the overbought level of 70 while the signal line of the MACD remains above the overbought level. The pair will likely continue the upward momentum.

USD/JPY

The USD/JPY pair was little moved in the Asian session. The pair is currently trading at 110.50, which is higher than Friday’s low of 110.23. It is lower than last week’s high of 111.13. The price is along the 21-day moving averages and along the middle line of the Bollinger Bands. The RSI has moved along the 50 level, while the money flow index has moved to almost the overbought level of 80. At this point, the pair could move in either direction.

Daily Pivots: (S1) 141.47; (P) 141.94; (R1) 142.84; More...

Intraday bias in GBP/JPY remains neutral at this point. Rebound from 131.51 could still extend higher. But we'd expect strong resistance from trend line (now at 146.64) to limit upside, at least on first attempt. On the downside, firm break of 140.62 will suggest completion of the rebound and turn bias to the downside.

In the bigger picture, the strong rebound from 131.51 suggests that medium term fall from 156.59 (2018 high) has completed already. The corrective structure of such decline is turn argues that it's the second leg of the corrective pattern from 122.36 (2016 low). And this pattern is starting the third leg. On the upside, decisive break of 149.38 will pave the way to 156.59 resistance and above.

General Trend:

• Telecom services and IT sectors outperform in China amid focus on trade talks
• Shanghai banking index rises over 1%, China Jan new loans hit record high
• Japanese equities supported by gains in financials and Marine/Transportation companies
• US markets closed in observance of holiday
• Resource and energy companies lead gains in Australia
• Singapore's DBS rises over 1% post earnings
• Japan cut assessment of machinery orders
• China auto sales continued to decline in Jan
• Commodity currencies rise, some press outlets note ‘optimism' related to US/China trade talks
• Reserve Bank of Australia (RBA) due to release policy meeting minutes on Tuesday
• US Commerce Dept. is expected to imminently release its auto-related recommendations, has submitted report to White House but details not disclosed yet
• HSBC is expected to report earnings on Tuesday (Jan 19th)
• BHP expected to report H1 results after Tuesday's close

Headlines/Economic Data

Japan

• Nikkei 225 opened +1.5%
• (JP) JAPAN DEC CORE MACHINE ORDERS M/M: -0.1% V -1.1%E; Y/Y: +0.9% V 3.4%E; Govt cuts assessment of machine orders, orders are stalling (prior recovering)
• 8001.JP China Foreign Ministry acknowledged a company worker has been detained on espionage allegations in China since Feb 2018 - Japanese Press
• 7201.JP Corporate governance panel expected to suggest an outside director to oversee board meetings - Nikkei
• (JP) Former BoJ Deputy Gov Iwata: Further rate cuts could bring some financial institutions 'under'; Japan must ramp up fiscal spending with debt bank rolled by BoJ

Korea

• Kospi opens +0.5%
• (KR) North Korea propaganda notes that N. Korea/US ties could experience "a major breakthrough," with the second summit; North Korea has not built or tested nuclear weapons of late, nor does it plan to use or spread these weapons
• 005930.KR Senior North Korean official is believed to have looked around areas near a smartphone factory in Vietnam owned by Samsung, sparking speculation that he may visit it – Yonhap
• (KR) South Korea Jan Foreign Net Investment in local bonds (KRW): -3.74T v +1.48 prior; Local Stocks (KRW): +3.7T v +0.1T prior
• 042660.KR Shipbuilders union to vote on strike against sale to Hyundai Heavy; voting concludes Tuesday Feb 19 -Korean Press
• (KR) Bank of Korea (BOK) sells 6-month Monetary Stabilization Bonds (MSB); avg yield 1.81% v 1.63% prior
• (KR) South Korea sells KRW1.85T v KRW1.85T indicated in 10-yr bonds, avg yield 1.985% v 1.995% prior, bid to cover 2.76x v 3.18x prior

China/Hong Kong

• Hang Seng opens +1.0%; Shanghai Composite opens +0.7%
• (CN) Over the weekend, US President Trump was briefed by advisers on trade talks with China; Trump called the talks ‘very productive' following the meeting – financial press
• (CN) China state news Xinhua: China and US can get closer to the final goal as the pace of talks quickens
• (CN) China corporate USD bond offerings over the last 3-months have an avg coupon of 7.8%, +2.2% y/y – press
• (CN) China State-Owned Assets Supervision and Administration Commission (SASAC) Chairman Xiao Yaqing reiterated to seek to attract foreign investment into larger state-owned enterprises (SOEs) - financial press
• (CN) China PBoC Head of Monetary Policy Dept Sun Guofeng said China does not wish to use administrative methods to require banks to lend - financial press
• (CN) Certain soybean traders in China played down recent cancellation of import orders - financial press
• (CN) China PBoC Open Market Operation (OMO): Skips reverse repo operations for 6th consecutive session; No injection or drain with no reverse repos maturing
• (CN) China PBoC sets Yuan Reference Rate: 6.7659 v 6.7623 prior
• (CN) CHINA JAN NEW YUAN LOANS (CNY): 3.230T V 3.00TE (record high) (Friday)
• (CN) CHINA JAN AGGREGATE FINANCING (CNY) : 4.64T v 3.31TE (Friday)
• (CN) CHINA JAN M2 MONEY SUPPLY Y/Y: 8.4% V 8.2%E; M1 Money Supply Y/Y: 0.4% v 1.9%e; M0 Money Supply Y/Y: 17.2% v 10.0% (Friday)

Australia/New Zealand

• ASX 200 opened +0.1%
• WBC.AU Gives Q1 update: Cash Profit A$2.04B
• BOQ.AU Guides H1 (A$) Net 165-170M; Rev (NII broadly inline y/y, non-interest income -10 to -8M y/y); NIM 1.93-1.95% v 1.97% y/y; Seeing continued downward pressure across fee, trading, insurance and other income lines
• BNO.AU Announces further analysis of phase II PTSD trial results: shows a statistically significant response of BNC210 in treatment of PTSD symptoms, as measured by CAPS-5 at 12 week (+54.2% during trade)
• (AU) Australia sells A$400M v A$400M indicated in 2.75% June 2035 bonds, avg yield 2.3978%, bid to cover: 2.44x
• (AU) Australia PM Morrison: A “sophisticated state actor” had hacked main political parties and parliament in the weeks leading up to election - press

Other Asia

• DBS.SG Reports Q4 (S$) Net 1.32B v 1.22B y/y; Rev 3.25B v 3.06B y/y
• (SG) SINGAPORE JAN NON-OIL DOMESTIC EXPORTS M/M: -5.7% V +6.7%E; Y/Y: -10.1% V -3.0%E
• (TH) Thailand Q4 GDP Q/Q: 0.8% v 0.7%e; Y/Y: 3.7% v 3.6%e
• 2330.TW Guides Q1 Rev reduction of $550M, Gross margin to fall 2.6%, Op margin to fall 3.2%, EPS to fall by NT$0.42 following Impact of Fab 14B Photoresist Material Incident (Friday after the close)

North America

• (US) Commerce Dept report supporting a 25% automobile tariff and other options could be released as soon as Sunday - press

Europe

• (UK) PM May office confirms she will return to Brussels for more talks with EC President Juncker this coming week
• (UK) PM May has been told that up to 7 cabinet members are ready to resign if she fails to prevent a no deal Brexit, which would block a vote on no deal Brexit, unless May gives her MPs freedom to vote on the issue – Telegraph
• (EU) ECB's Rehn (Finland): recent data point to a weakening economy in the euro zone, cited greater uncertainties outside the euro zone - German Press
• (FR) ECB's Villeroy (France): Timing of rate hike depends on length of current slowdown - financial press

Levels as of 12:50ET

• Hang Seng +1.7%; Shanghai Composite +2.3%; Kospi +0.4%; Nikkei225 +1.8%; ASX 200 +0.4%
• Equity Futures: S&P500 -0.0%; Nasdaq100 +0.0%, Dax -0.1%; FTSE100 -0.1%
• EUR 1.1290-1.1325; JPY 110.46-110.58; AUD 0.7135-0.7159; NZD 0.6857-0.6894
• Commodity Futures: Gold +0.3% at $1,326/oz; Crude Oil +0.5% at $56.25/brl; Copper +0.3% at $2.82/lb

Daily Pivots: (S1) 124.35; (P) 124.61; (R1) 124.99; More....

Intraday bias in EUR/JPY remains neutral for the moment. At this point, we're favoring the case that rebound from 118.62 has completed at 125.95 already, just ahead of 55 day EMA. On the downside, break of 123.78 will add more credence to this case and target a test on 118.62 low. On the upside, however, decisive break of 125.95 will dampen our bearish view and target 129.25 resistance next.

In the bigger picture, medium term rebound from 109.03 (2016 low) has completed at 137.49 already, with corrective structure. Fall from 137.49 is likely still in progress. Decisive break of 118.62 will target 161.8% projection of 137.49 to 124.61 from 133.12 at 112.28, which is inside 109.03/114.84 support zone.

Daily Pivots: (S1) 0.8727; (P) 0.8780; (R1) 0.8814; More...

Intraday bias in EUR/GBP remains neutral at this point. As long as 0.8728 support holds, further rise is still in favor. On the upside, break of 0.8840 will extend the rebound from 0.8617 to 61.8% retracement of 0.9101 to 0.8617 at 0.8916. Break will pave the way back to 0.9101 key resistance. On the downside, however, firm break of 0.8728 will argue that rebound from 0.8617 has completed. Intraday bias will be turned back to the downside for this low.

In the bigger picture, EUR/GBP is seen as staying in long term range pattern started at 0.9304 (2016 high). The medium term range is set between 0.8620 and 0.9101. Downside breakout of 0.8620 will pave the way back to 0.8312 support . Break of 0.9101 will bring retest of 0.9304/5 resistance.

Daily Pivots: (S1) 1.5765; (P) 1.5853; (R1) 1.5905; More....

Intraday bias in EUR/AUD remains neutral at this point. With 1.5721 support intact, further rise is still in favor. On the upside, break of 1.6060 resistance should confirm that decline from 1.6765 has completed. Further rally should then be seen to retest 1.6765 high. On the downside, however, break of 1.5721 will extend the decline to 1.5346 support instead.

In the bigger picture, as long as 1.5346 support holds, outlook will remain bullish. Uptrend from 1.1602 (2012 low) is expected to resume sooner or later. Break of 1.6765 will target 61.8% retracement of 2.1127 (2008 high) to 1.1602 at 1.7488 next. However, firm break of 1.5346 key support will indicate trend reversal, with bearish divergence condition in weekly MACD, and turn outlook bearish.

Daily Pivots: (S1) 1.1335; (P) 1.1347; (R1) 1.1362; More...

Intraday bias in EUR/CHF remains neutral for consolidation in range of 1.1310/1444. Further rise is still mildly in favor with 1.1310 intact. On the upside, break of 1.1444 will resume whole rally from 1.1181 for 1.1501 key resistance next. However, break of 1.1310 will argue that the rebound from 1.1181 might be completed. Intraday bias will be turned back to the downside for 1.1181 low again.

In the bigger picture, price actions from 1.2004 medium term top is seen as a correction only. Downside should be contained by 1.1154/98 support zone to complete it and bring rebound. Decisive break of 1.1501 (38.2% retracement of 1.2004 to 1.1173 at 1.1490) will confirm completion of the correction, on bullish convergence condition in daily MACD. Further rise should be seen to 61.8% retracement at 1.1687 and above next.

Trade talks resume in Washington as progress towards extension continues

It's going to be a relatively quiet start to the week, with market closures in the US and Canada typically weighing heavily on trading activity, data and news flow.

Stocks in Europe are expected to open a little higher on Monday, continuing the bullish trend as risk appetite continues to be supportive. Signs of progress in trade talks between the US and China is an important factor, with negotiations set to continue in Washington this week as both sides seek to avoid further tariffs when the truce expires later this month.

An extension looks the most likely outcome, with 90 days just not enough time to reach a comprehensive deal. Trump has indicated that he could support an extension despite claiming to like tariffs during his press conference on Friday, something that will comfort investors at a time when global growth concerns are posing a significant risk for markets.

Gold breaks $1,320 as trade talks weigh on the dollar

The dollar has lost some of the appeal that saw it rebound strongly this month to trade back near the highs from late last year. The dollar is sensitive to a variety of developments right now and trade talks are one of them, with progress having previously being a headwind for the greenback having accelerated its gains as tariffs were imposed last year.

Softness in the dollar is good for gold though which has rallied to just above $1,320 on the first sign of weakness. The rally has held up around the same levels it did at the end of January, although this may just prove to be temporary resistance, with the market looking quite bullish on gold right now.

Oil breaking major resistance could be bullish catalyst

Oil is another that is benefiting from a weaker dollar, with WTI and Brent now trading slightly above major resistance around $55 and $65, respectively. Should this hold, it will be a very bullish signal for oil and could be the catalyst for another push higher.

Market movers today

There are no significant economic releases today, so focus will be on political events , and most notably the signals from the US and Chinese sides in the ongoing trade talks ahead of the end-February deadline. The trade talks are set to continue in Washington this week. Also in focus will be the political fall-out from Trump's decision to declare national emergency in order to find funding for his border wall to Mexico. Note that it is the President's Day holiday in the US today and hence US markets will be closed.

Brexit negotiations between the UK and EU will continue to attract headlines as we approach end-February, where a new House of Commons vote is set to take place.

In the Scandies, today will bring the preliminary labour market report from the Technical Calculation Committee and Swedish house prices, see Scandi page 2.

Later this week we will have more comments from central bankers on the growth and monetary policy outlook. A number of Fed officials will speak this week as well as both ECB's Draghi and Praet. Furthermore, a broad set of Markit PMIs alongside FOMC and ECB minutes will be released. See the Weekly Focus here.

Selected market news

Global equity markets are off to a strong start this morning with most Asian and Pacific equity indices trading in 'green' on the back of Friday's US rally and optimistic comments from the high-level US/China trade negotiations that ended in Beijing last week. China Central Television reported that the two parties had reached consensus in principle on key topics while a White House statement said the discussions "led to progress between the two parties" even if "much work remains". This week the negotiations continue in Washington.

In the US, the Commerce Department has submitted its long awaited report on the national security implications of auto tariffs to the White House. Meanwhile, the content of the report was not made public. Trump has 90 days to decide on whether to act on the recommendations which could include raising import tariffs on fully assembled vehicles.

On Friday, markets reacted to news headlines from ECB's Benoir Coueré on possible TLTROs. Meanwhile, according to our ECB economist Piet Christiansen, the headlines did not do justice as to what was actually said. Coueré said: "There is a big discussion in the market of having a new TLTRO. It is possible, we are discussing it, but we want to make sure that it serves a monetary policy purpose, so it has to be useful to maintain credit conditions, support credit in the eurozone where credit is needed. If we are convinced we will do it ". He also stated the net stable funding ratio (NSFR) is not a monetary policy argument. Hence, Piet's take was that nothing new was said relative to previous Draghi comments and we stick to our non-consensus view that no TLTRO will be announced in March, see ECB Research: TLTRO - no longer our base case , 9 February.

As expected, a general election has been called in Spain as a result of the rejection of the national budget last week. The election date is set for 28 April and will mark the third general election in less than four years. However, we are not overly concerned about the political situation in Spain. The leading centre-right wing coalition members are all fairly pro-EU and a change of government would be seen as market friendly.

For the 24 hours to 23:00 GMT, the EUR slightly rose against the USD and closed at 1.1297 on Friday.

Macroeconomic data showed that the Euro-zone's seasonally adjusted trade surplus narrowed to €15.6 billion in December, amid decrease in exports and compared to market expectations for a surplus of €15.7 billion. The nation had posted a revised surplus of €15.8 billion in the previous month.

In the US, data showed that the preliminary Reuters/Michigan consumer sentiment index climbed to a level of 95.5 in February, following a reading of 91.2 in the prior month. Market participants had envisaged the index to advance to a level of 93.5. Moreover, the nation's NY Empire State manufacturing index advanced to a level of 8.8 in February, surpassing market expectations for a rise to a level of 7.0. In the preceding month, the index had registered a reading of 3.9.

On the other hand, the US manufacturing production unexpectedly dropped by 0.9% on a monthly basis in January, led by losses in the automobile sector and defying market expectations for a steady reading. In the preceding month, manufacturing production had recorded a revised gain of 0.8%. Also, the industrial production surprisingly fell for the first time in eight months by 0.6% on a monthly basis in January, cofounding market consensus for a rise of 0.1%. Industrial production had registered a revised climb of 0.1% in the prior month.

In the Asian session, at GMT0400, the pair is trading at 1.1317, with the EUR trading 0.18% higher against the USD from Friday's close.

The pair is expected to find support at 1.1259, and a fall through could take it to the next support level of 1.1201. The pair is expected to find its first resistance at 1.1350, and a rise through could take it to the next resistance level of 1.1383.

Amid no major economic releases in the US and Euro-zone today, traders would focus on global macroeconomic events for further direction.

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