Sample Category Title

The pair stands at the back foot on Friday after double rejection under important 200SMA barrier and downbeat US retail sales on Thursday hurting the greenback.

Bearish extension in early Friday pressures pivotal supports at 110.22/19 (broken Fibo 61.8% / rising 10SMA), close below which would generate negative signal for deeper pullback.

Stochastic on daily chart emerged from overbought zone after forming bearish divergence, but flat momentum and RSI and daily MA’s in mixed mode, lack firmer signals.

Friday’s close below 10SMA would signal temporary top at 111.12 and open way for test of 109.78 (20SMA) and 109.44 (30SMA).

Ability to hold above 10SMA would keep bullish bias for renewed attempt at 200SMA.

Res: 110.55, 111.12, 111.28, 111.40
Sup: 110.19, 109.78, 109.44, 109.15

December's retail sales gave a stark reminder that the economy is not rosy anymore. They contracted 1.2% monthly in December versus +0.1% expected, and November's figures were downwardly revised. This is the largest contraction since September 2009. Similarly, the gauge that excludes automobiles and gasoline slumped 1.4% monthly compared to forecasts of +0.4% and +0.5% in November. Why? First, the US federal government shutdown that started on 22 December sparked cautiousness among consumers and deprived civil servants of an income. Second, the December market sell-off was violent enough to remind both investors and consumers that a recession is still a possibility. There is a good chance that consumers increased saving at the expense of spending.

In the FX market, poor US data triggered some volatile moves but failed to set a clear trend. Safe-haven assets such as the Japanese yen benefited from the surprise. USD/JPY fell more than 0.75% to reach 110.35. Gold is also better bid as the price of an ounce rose to $1,315 this morning from $1,302 yesterday.

Crude oil surging

The rise in inventories continues, and attention is turning to OPEC+ members which have tightened supply, pushing Brent, WTI and Shanghai future up by 4.15%, 3.13% and 2.95%, their highest in 3 months. US sanctions against Venezuela's oil giant PDVSA is causing supply shortages while US refineries scramble to find alternative supplies. A December pledge from OPEC + to cut output by 1.2 million barrels per day is taking effect. Saudi Arabia made the largest cut, estimated at 450'000 bpd. A technical problem at its offshore Safaniyah field, where production can reach up to 1.5 million bpd, should be fixed in March. Russia's vow to decrease production by 228'000 bpd by May should also support prices. Still, the macroeconomic outlook remains bearish in the medium-term. Weakening economic growth in the US, EU and Asia and a continued rise in US crude output should maintain Brent prices in a range of USD 60–70 in the coming months. Currently trading at 64.75, Brent is heading along USD 65 short-term.

Notes/Observations

• Some risk aversion sentiment in session as no visible progress on US-China high-level trade talks
• UK Jan retail sales beat expectations with upward back-month revisions
• China Jan New Yuan Loans hit a record high at CNY3.23T; hints that monetary easing might be starting to gain more traction

Asia:

• Little progress said to have been made in the 2nd day of negotiations in Beijing on core issues increasing pressure on President Trump to extend delay the Mar 1st deadline. US and China officials said to be 'scrambling' to at least produce memorandum of understanding (MOU) by end of today, MOU could help pave the way for meeting between Trump and China President Xi
• China Jan CPI remains muted and hits a 1-year low (YoY 1.7% v 1.9%e)

Europe:

• UK lawmakers rejected a symbolic govt motion that sought reaffirmation of support that sought changes to Brexit deal.
• PM May has said a no-deal Brexit is "more likely" after Tory Eurosceptics condemned her to another humiliating Commons defeat
• UK Parliament voted against SNP's 'Amendment I' and Labour's 'Amendment A'. UK Lawmakers also voted against Labour's 'Amendment A' 322 to 306 which would have offered a meaningful vote by end of February, and should there not a no deal, then the government had to make a statement on what the next steps will be. UK Lawmakers also voted against SNP's 'Amendment I' 315 to 93 which would have required the Government to negotiate an extension of at least three months to Article 50 process. MP Soubry withdrew 'Amendment E' before the vote which would have called for the govt to publish analysis of impact of a 'no-deal' Brexit on business and trade
• Britain to soften its demand that the EU reopen the Brexit withdrawal agreement to solve the Irish backstop issue. Brexit Sec Barclay said to have suggested to the EU's chief negotiator Barnier during talks this week
• Norway Central Bank (Norges) Gov Olsen reiterated stance that key policy rate would be raised gradually and cautiously if the economy developed as expected

Americas:

• US Congress passed a spending bill keeping the govt open. President Trump stated he would sign and then declare a national emergency to get more border wall funding
• House Speaker Pelosi (D-CA): might file legal challenge if President Trump declared national emergency over border wall; she would consider options
• US Commerce Dept was expected to meet Sunday (Feb 17th) deadline to issue auto-related recommendations to President Trump

Macro

• (ES) Spain: As expected PM Sanchez called a snap general election for April 28th Spain after his minority government failed to get the 2019 budget through parliament. The biggest factor to watch here not just for Spain, but the Eurozone and the wider EU, is whether the three right wing parties form an alliance and take over. In Italy, the populists, especially on the right appear to be strengthening their power base and while President Macron managed to hold off the Eurosceptics at the last election, he has also come under severe pressure domestically. The key question for many is to what extent the European parliament elections, held May 23-26, will see populist parties widening their support base.
• (UK) United Kingdom: Prime Minister May suffered another humiliating defeat in parliament overnight, this time in a motion that was meant to endorse the government's negotiating strategy. The House voted by 303 to 258. The vote was not legally binding, and a spokesperson for the prime minister confirmed that the government will continue in its efforts to secure concessions on the Irish backstop part of the withdrawal agreement before returning to parliament by no later than February 27. If the government has not secured support for a deal by this time, it would make a statement and table an amendable motion, to which the House of Commons will then vote on. A final vote could be delayed until after a key EU summit on March 21, just a week before the actual exit day.

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +0.3% at 364.8, FTSE +0.2% at 7208, DAX 0.1% at 11097, CAC-40 +0.6% at 5094, IBEX-35 +0.4% at 8984, FTSE MIB +0.1% at 19856, SMI +0.3% at 9169, S&P 500 Futures -0.1%]
• Market Focal Points/Key Themes: European Indices trade mixed following lower Asian markets and lower US futures after cautious US-China trade related headlines. On the corporate front German Insurance giant Allianz trades higher after inline earnings and guidance; EDF trades over 4% lower after a cautious 2019 outlook; RBS trades higher on earnings while Vivendi trades notably higher after strong earnings. Elsewhere Eni, Bollore and Saab are among other names trading higher on earnings while Eutelsat, Pirelli, Ubisoft and Fingerprint Cards are among the decliners on earnings. On the M&A front Scout24 trades over 10% higher after receiving a €46/shr offer; MDxHealth gains on a positive data presentation while Plus500 continues to fall after a report alleged disclosures made during this weeks earnings contradicts its last annual report raising questions about whether it may have misled shareholders. Looking ahead notable earners include PepsiCo, Deere and Co, Wabco, American Axle and Moody's among others.

Equities

• Consumer discretionary: Vivendi Universal [VIV.FR] +7% (earnings), Ubisoft [UBI.FR] -1.6% (earnings), Scout24 [G24.DE] +12% (welcomes takeover offer)
• Energy: Eni [ENI.IT] +0.2% (earnings), Electricite de France [EDF.FR] -4% (earnings)
• Financials: Allianz [ALV.DE] 1.0% (earnings), Royal Bank of Scotland [RBS.UK] +1.3% (earnings), Euronext [ENX.FR] -1% (earnings), Millenium & Copthorne [MLC.UK] +0.8% (earnings), Plus500 [PLUS.UK] -12% (reports its misled investors)
• Industrials: Saab [SAABB.SE] +5.5% (earnings), Pirelli [PIRC.IT] -1.5% (earnings), Panalpina Welttransport [PWTN.CH] +8% (confirms in talks on Logistics deal, receive CHF180/shr offer from DSV), Alstom [ALO.FR] 1.5% (analyst action)
• Technology: Fingerprint Cards AB [FINGB.SE] -2.5% (earnings)

Speakers

• UK Commons leader Leadsom: Confident that Parliament will support a deal id Irish backstop changed. Government is determined to keep a no-deal Brexit on the table
• Spain PM Sanchez said to call for general elections for April 28th (in-line with press speculation)
• Czech Central Bank Feb Minutes: Majority assessed risks to forecasts as slightly inflationary and tilted towards higher interest rates. Members Benda and Michl dissented and sought a 25bps rate hike in Feb. Some board members viewed new staff forecast as moderately optimistic in regards to growth
• US Treasury Sec Mnuchin tweeted that had a productive meeting with China Vice Premier Liu He
• China FX Regulator SAFE reiterated view that cross-border capital flow remained basically stable

Currencies/Fixed Income

• USD steady despite recent soft US data with the US-China trade talks in focus. The greenback and JPY currencies benfited as some risk aversion sentiment reverberated as no visible progress on US-China high-level trade talks were yet visible.
• GBP moved off 1-month lows and reversed earlier losses as UK retail sales data handily beat expectations. GBP/USD tested below the 1.28 level as PM may was dealt another Brexit blow in parliament regarding her strategy
• EUR/USD was lower by 0.1% and holding below the 1.13 level.

Economic Data

• (NL) Netherlands Dec Retail Sales Y/Y: 0.9% v 4.6% prior
• (PE) Peru Dec Economic Activity Index (Monthly GDP) Y/Y: 4.7% v 5.3% prior
• (PE) Peru Jan Unemployment Rate: 6.5% v 6.1% prior
• (EU) EU27 Jan New Car Registrations: -4.6% v -8.4% prior (5th straight decline
• (NO) Norway Jan Trade Balance (NOK): 28.8B v 25.0B prior
• (FI) Finland Dec Current Account Balance: -€0.5B v +€0.1B prior
• (TR) Turkey Nov Unemployment Rate: 12.3% v 11.8%e
• (CN) China Jan New Yuan Loans (CNY): 3.20T v 3.000Te
• (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%
• (CN) China Jan Aggregate Financing (CNY): 4.64T v 3.31Te
• (NG) Nigeria Jan CPI Y/Y: 11.4% v 11.4% prior
• (CN) Weekly Shanghai copper inventories (SHFE): 207.1K v 142.7K tons prior
• (TR) Turkey Jan Central Gov't Budget Balance (TRY): 5.1B v -18.1B prior
• (TW) Taiwan Jan Trade Balance: $0.9B v $3.2Be; Exports Y/Y: -0.3% v -3.5%e; Imports Y/Y: +6.8% v -3.7%e
• (ES) Spain Jan Final CPI M/M: -1.3% v -1.3%e; Y/Y: 1.0% v 1.0%e
• (ES) Spain Jan Final CPI EU Harmonized M/M: -1.7% v -1.7%e; Y/Y: 1.0% v 1.0%e
• (ES) Spain Jan CPI Core M/M: -1.5% v 0.0% prior; Y/Y: 0.8% v 1.0%e
• (CZ) Czech Q4 Advance GDP Q/Q: 1.0% v 0.7%e; Y/Y: 2.9% v 2.4%e
• (RU) Russia Narrow Money Supply w/e Feb 8th (RUB): T v 10.13T prior
• (PL) Poland Jan CPI M/M: 0.1% v 0.1%e; Y/Y: 0.9% v 1.0%e
• (IT) Italy Dec Total Trade Balance: €3.7B v €3.9B prior; Trade Balance EU: -€0.6B v +€0.5B prior
• (CN) China Q4 Preliminary Current Account: $54.6B v $23B prior
• (IT) Italy Dec General Government Debt: €2.317T v €2.345T prior
• (UK) Jan Retail Sales (Ex-auto/fuel) M/M: 1.2% v 0.2%e; Y/Y: 4.1% v 3.2%e
• (UK) Jan Retail Sales (including auto/fuel) M/M: 1.0% v 0.2%e; Y/Y: 4.2% v 3.4%e
• (BR) Brazil Feb FGV Inflation IGP-10 M/M: 0.4% v 0.3%e
• (EU) Euro Zone Dec Trade Balance (Seasonally Adj): €15.6B v €15.7Be; Trade Balance NSA (unadj): €17.0B v €19.0B prior

Fixed Income Issuance

• (ZA) South Africa sold total ZAR650M vs. ZAR650M indicated in I/ L 2029, 2038 and 2050 bonds
• (IN) India sold total INR120B vs. INR120B indicated in 2021, 2027, 2032, 2035 and 2055 bonds

Looking Ahead

• 05:30 (BR) Brazil Dec Economic Activity Index (Monthly GDP) M/M: 0.0%e v 0.3% prior; Y/Y: 0.0%e v 1.9% prior
• 06:00 (IE) Ireland Dec Trade Balance: No est v €4.6B prior
• 06:00 (UK) DMO to sell €3.5B in 1-month, 3-month and 6-month bills (£0.5B, £1.5B and £1.5B respectively)
• 06:30 (IN) India Weekly Forex Reserves w/e Feb 8th: No est v $400.2B prior
• 06:45 (US) Daily Libor Fixing
• 07:00 (IL) Israel Jan CPI M/M: -0.3%e v -0.3% prior; Y/Y: 1.0%e v 0.8% prior
• 08:00 (UK) Baltic Dry Bulk Index
• 08:00 (FR) ECB's Coeure (France) in NY (RU) Russia Jan Industrial Production Y/Y: 1.8%e v 2.0% prior
• 08:00 (IN) India announces upcoming bill issuance (held on Wed)
• 08:00 (ES) Spain Debt Agency (Tesoro) announces upcoming issuance
• 08:30 (US) Feb Empire Manufacturing: 7.0e v 3.9 prior
• 08:30 (US) Jan Export Price Index M/M: -0.1%e v -0.6% prior; Y/Y: No est v 1.1% prior
• 08:30 (US) Jan Import Price Index M/M: -0.2%e v -1.0% prior; Y/Y: -1.6%e v -0.6% prior; Import Price Index (ex-Petroleum) M/M: -0.1%e v 0.3% prior
• 08:30 (CA) Canada Dec Int'l Securities Transactions (CAD): No est v 9.5B prior
• 09:00 (CA) Canada Jan Existing Home Sales M/M: -0.6%e v -2.5% prior
• 09:00 (BE) Belgium Dec Trade Balance: No est v -€1.0B prior
• 09:15 (US) Jan Industrial Production M/M: 0.1%e v 0.3% prior; Capacity Utilization: 78.7%e v 78.7% prior; Manufacturing Production: 0.0%e v 1.1% prior
• 09:55 (US) Fed's Bostic
• 10:00 (US) Feb Preliminary University of Michigan Confidence: 93.5e v 91.2 prior
• 10:00 (US) Q4 MBA Mortgage Foreclosures: No est v 0.99% prior; Mortgage Delinquencies: No est v 4.47% prior
• 10:45 (IT) ECB's Angeloni (Italy, SSM member)
• 13:00 (US) Weekly Baker Hughes Rig Count data
• 16:00 (US) Dec Net Long-term TIC Flows: No est v $37.6B prior; Total Net TIC Flows: No est v $31.0B prior

During the previous trading session, the British Pound passed through the support level of the weekly S1 at 1.2831. On Friday morning, the rate was located at the 1.2805 mark.

In regards to the near-term future, most likely, the British Pound will depreciate against the US Dollar to the 1.2760 mark.

On the other hand, today's UK Retail Sales data release at 9:30 GMT could push the rate to break the resistance level of the weekly S1 at 1.2831 mark to trade at the 1.2820 level.

During the previous trading session, the USD/JPY passed through the support level of the weekly R1 at 110.51. On Friday morning, the 200-hour simple moving average supported the rate to push it to trade at the 110.38 mark.

In regards to the near-term future, it is expected that the currency exchange rate will trade sideways to stay at the 110.20 level during the day.

However, the 200-hour simple moving average could give additional support to the rate to break the resistance of the weekly R1 to trade at the 110.60 level.

During the previous trading session, the yellow metal appreciated against the US Dollar to break the resistances of the simple moving averages. On Friday morning, the rate was supported by the 200-hour and the 100-hour SMAs to trade at the 1,316.06 mark.

In regards to the near-term future, it is expected that the 100-hour and the 200-hour simple moving averages will continue to support the rate to the 1,320.00 level.

Keep in mind, none of the technical indicators could prevent the rate from the surge!

The US Commerce Department is set to deliver its recommendation to the White House regarding auto tariffs, meeting a deadline on Sunday. Ahead of that German Ifo institute warned that if US imposes 25% additional, permanent tariffs on cars, that could reduce German car experts to the US by 50% in the long run.

For Germany, according to Gabriel Felbermayr, director of the ifo Center for International Economics, total car exports could drop by -7.7%, or EUR 18.4B. But, exports from other sectors and to other countries could "slightly cushion" the overall loss. But the net result could still be EUR 11.6B loss of exports.

Felbermayr adds: "The EU can, however, develop a clever counterstrategy that would bring the effects of US tariffs on the economic performance of both sides to roughly zero. That would be tariffs on US products whose manufacturers would have to react with price reductions. This, in turn, would harm third countries whose economic output could fall by about five billion euros." All calculations assume adjustment reactions, 90 percent of which take place within five years.

Full statement here.

During the previous trading session, the European Single Currency was resisted by the 55-hour simple moving average to pass the support level of the weekly S1 at 1.1276. On Friday morning, the rate was located at the 1.1265 mark.

In regards to the near-term future, most likely, the currency exchange rate will depreciate to the weekly S2 at the 1.1229 mark.

Meanwhile, the 55-hour and the 100-hour simple moving averages continue to decline the rate towards the 1.1200 level.

The US Dollar has been trading in a junior ascending channel pattern against the Canadian Dollar since the beginning of February. The currency pair breached the monthly pivot point at 1.3302 during yesterday's session.

Given that the currency exchange rate has breached the monthly PP as mentioned above, bullish traders could push the pair towards a resistance level formed by the weekly R1 at 1.3378.

Meanwhile, technical indicators demonstrate that bulls will continue their dominance in the market within this session.

The New Zealand Dollar appreciated about 56 base points against the US Dollar on Thursday. The currency pair tested the upper boundary of a junior descending channel pattern at 0.6855 during Thursday's trading session.

As for the near future, it is likely that the NZD/USD exchange rate will decline towards a support level formed by the combination of the 200-hour simple moving average and the weekly pivot point at 0.6795.

However, the currency exchange rate needs to surpass the 50-hour SMA located at 0.6824 within this session.