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Entering into US session, Yen and Swiss Franc are trading as the weakest one for today on easing risk aversion. At the time of writing, major European indices are trading higher, following 1.36% gain in China SSE. Sterling also softens after poor GDP data, which showed contraction in December. 2018 overall was also the worst year in UK since 2012. But weakness in the Pound is so far limited. Meanwhile, Canadian, New Zealand and Dollar are the three strongest ones.

Technically, USD/CHF's rally resumed by taking out 1.0028 and is on track to retest 1.0128 high. USD/JPY also broke out of tight range, through 110.16, to resume recent rebound. EUR/USD edges lower today and is eyeing 1.1289 support. Break there will bring retest of 1.1215 low next. AUD/USD weakens today, thanks to Dollar's strength mainly, and it main challenge 0.7060 temporary low later in the session.

In European markets, currently:

• FTSE is up 0.77%.
• DAX is up 1.02%.
• CAC is up 1.09%.
• German 10-year yield is up 0.0241 at 0.114.

Earlier in Asia:

• Hong Kong HSI rose 0.71%.
• China Shanghai SSE was back from holiday and rose 1.36%.
• Singapore Strait Times rose 0.13%.
• Japan was on holiday today.

US 30 stock index found strong resistance obstacle at the 200-simple moving average (SMA) in the daily timeframe, hovering around the 61.8% Fibonacci retracement level of the downleg from 2,940 to 2,332, near 2,708. The short-term technical indicators support this notion as the RSI is marginally pointing upwards in the positive area, while the MACD lies near the trigger and zero lines.

A fresh wave of advances may stall initially near the 200-SMA, but a successful jump above this key level would increase chances for a touch of the 2,820 resistance level, switching the neutral outlook to a more bullish one in the short-term. A significant leg above this region would open the way towards the next barrier of 2,863.

On the downside, support to further bearish actions may come around the 2675 level, taken from the inside swing top on January 18. Even steeper bearish extensions may encounter support around the 50.0% Fibonacci mark of 2,636.

Overall, the US 500 index is in progress of a bullish correction and this action would be confirmed in case of a daily close above 200-SMA.

UK Trade Minister Liam Fox said today that Brexit is not the only reason for growth slowdown. He said in a news conference that "clearly there are those who believe that Brexit is the only economic factor applying to the UK economy."

But he argued that "the predicted slowdown in a number of European economies is not disconnected from the slowdown, for example, in China". And, "the idea that Brexit is the only factor affecting the global economy is just to miss the point."

Meanwhile, even with Brexit impasse, "the chances of having a second referendum are as close to nil as I could imagine."

UK Prime Minister Theresa May's spokesman said she will make a statement in the parliament tomorrow. And, "that will be an update on Brexit talks and is in advance of the debate taking place on Thursday."

That was a day ahead of market expectations. But anyway, parliament debate on February 14 will be a major focus this week. Attention would be on any motions that could shift the control of Brexit from the government to the parliament. And if so, that would open up the route for lawmakers to renegotiate, delay, or even block Brexit.

The DAX index has steadied on Monday after sharp losses last week. On Monday the DAX is at 10,991, up 0.78%. There are no German or eurozone events on the schedule.

It was a dismal week for the DAX, which plunged 2.45% last week. Investors responded negatively to disappointing data out of the eurozone and Germany. Eurozone retail sales plunged 1.6% in January, its worst reading since December 2013. German manufacturing reports headed lower, raising concerns about the health of the eurozone’s largest economy. Factory orders slipped 1.6%, a second straight decline. Industrial production declined 0.4%, its sixth decline in seven months. German consumer indicators have also stumbled, raising concerns about the health of the eurozone’s largest economy. CPI declined by 0.8% in January and retail sales plunged 4.3% in December. If Germany and the eurozone continue to post soft numbers, the slide on Germany equity markets could continue.

Another factor affecting European stock markets last week was investor apprehension over the U.S-China trade war. Although the sides are talking, markets slipped after President Trump that he would not hold a meeting with President Xi prior to the March 2 deadline, when the U.S. is set to impose further tariffs if the sides fail to reach a deal. A third round of negotiations starts this week, with Treasury Secretary Mnuchin joining the talks later in the week. Investors are frustrated that there are no signs of progress, leading to concerns that the sides will not be able to reach a deal by March 2.

After posting five losing days last week, the trend continues as EUR/USD has started the week in the red. On Monday, the pair is trading at 1.1307, down 0.13% on the day. It’s a slow day for fundamentals, with no data events in the eurozone or the United States. On Tuesday, the U.S. releases JOLTS Jobs Openings and Federal Reserve Chair Powell speaks at an event in Washington.

The euro suffered its worst week since late September, falling 1.1 percent. Investors responded negatively to disappointing data out of the eurozone and Germany. Eurozone retail sales plunged 1.6% in January, its worst reading since December 2013. German manufacturing reports headed lower, raising concerns about the health of the eurozone’s largest economy. Factory orders slipped 1.6%, a second straight decline. Industrial production declined 0.4%, its sixth decline in seven months. German consumer indicators have also stumbled, raising concerns about the health of the eurozone’s largest economy. CPI declined by 0.8% in January and retail sales plunged 4.3% in December. If the soft numbers continue, the euro slide could continue.

The Federal Reserve does not hold its policy meeting until mid-March, so investors will be left to focus on remarks from Fed Chair Jerome Powell and his colleagues. The Fed raised interest rates four times last year, but economic conditions are very different in 2019. The U.S-China trade war has dampened global growth and rocked the equity markets. With the U.S. unlikely to replicate the sparkling growth we saw in 2018, the Fed is projecting just two rate increases this year. The markets, however, are predicting no rate moves, and some analysts are even talking about the possibility of a rate cut late in 2019

The single European currency has appreciated about 2.06% against the Australian Dollar since February 4. This rally was stopped by a resistance level formed by the weekly PP at 1.6047.

The exchange rate was stranded between SMAs during the morning hours of Monday's trading session. The 200-hour simple moving average was providing resistance for the pair at 1.5996, while the 50– and 100-hour SMAs was providing support.

Technical indicators flash bullish signals on the 4(H) time-frame. Therefore, it is likely that the currency exchange rate will surpass the 200-hour SMA during the following trading sessions.

The common European currency has appreciated about 1.10% in values against the Canadian Dollar since February 4. The currency pair tested the upper boundary of a descending channel pattern at 1.5120.

As for the near future, it is likely that the exchange rate continues its movement in the descending channel pattern. The potential downside target will be near the bottom border of a dominant ascending channel at 1.4945.

If the support level formed by the lower boundary of the dominant channel holds, a bullish sentiment could be introduced in the shorter term.

Notes/Observations

• String of disappoint UK data with Q3 Preliminary GDP, Dec production data and Dec Trade balances all missing expectations
• China Dec Foreign Reserves rise for the 3rd straight month with another increase in its gold holdings
• Trade talks with China continue (mid-level meeting begin today ahead of high-level talks on Thursday)
• Threat of a US government shutdown is still in play for the end of the week; Friday marks the deadline that stopgap funding for the US government expires

Asia:

• China 2019 GDP expected to slow to 6.3% in 2019 v 6.6% in 2018 (Note: compares to speculation of 6.0-6.5% range). The Q1 GDP growth might slow to 6.0% which would be the weakest Q1 on record
• Nikkei225 closed for holiday while Shanghai Composite resumed trading after the week-long Lunar New Year holiday

Europe:

• PM May responded to Labour Party leader Corbyn's letter setting out his five demands for a Brexit deal. PM queried his call for the UK to stay in a customs union with the EU did not reject any of his conditions outright in her reply. Welcomed more talks with Labour on a Brexit agreement.
• Switzerland and the UK were expected to sign a trade continuity agreement on Monday (Feb 11th). The agreement would allow the 2 countries to trade freely without new tariffs but did not include financial services

Americas:

• Trump's advisers said to have informally discussed holding a summit in March with China President Xi to try to end the trade war; Trump said to plan phone conversation with Xi before March 1 tariff deadline
• Talks on funding border wall between Republicans and Democrats said to again come to a stalemate, with next govt shutdown looming

Macro

• (EU) Eurozone: ECB's Guindos said he sees core inflation accelerating in the medium term, which suggests that there has been no further downward shift in the ECB's policy stance. He reiterated that the ECB will be prudent in setting monetary policy and maintain favorable credit conditions which suggests there will be no rush towards normalization of policy.
• (UK) United Kingdom: Prime Minister May has until Thursday before the government will be committed to tabling another amendable motion. However, it looks increasingly likely that this may be delayed. Cabinet member James Brokenshire said over the weekend that if no finalized deal were put to Parliament by 27th February, members of parliament would be given an amendable motion to consider, allowing them to block a no-deal departure or make other interventions. Several cabinet ministers have said that a no-deal Brexit could lead to a vote on Irish unification, with one minister saying the prospect is "very real".

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +0.94% at 361.52, FTSE +0.94% at 7,140.25, DAX +0.97% at 11,012.55, CAC-40 +1.06% at 5,014.06, IBEX-35 +1.07% at 8,952.00, FTSE MIB +1.47% at 19,635.50, SMI +0.86% at 9,078.00, S&P 500 Futures +0.36%]
• Market Focal Points/Key Themes: European Indices trade higher across the board with most of the indices trading around 1% higher after a flat close on Wall Street on Friday a mixed session in Asia and higher US futures this morning. On the corporate front Carl Zeiss Meditec trades higher on earning with Lysogene , Lok N Store Group and Avation trading higher on a trading updates. In other news Stride Gaming rises after the company confirms its review of all strategic options; Deutsche Post also rises after delaying its price increase on Letters to the summer. To the downside Smith and Nephew falls over 3% after reports its in talks to acquire Nuvasiv for over $3B. Looking ahead notable earners include Loews Corp, Insperity and Aurora Cannabis among others.

Equities

• Consumer discretionary: Deutsche Post [DPW.DE] +2.5% (said to delay price increases), Just Eat [JE.UK] +1.5% (shareholder calls for merger talks), Reach [RCH.UK] +5% (new contract)
• Energy: GALP Energia [GALP.PT] +0.5% (earnings)
• Financials: Euronext [ENX.FR] +0.5% (raises offer for Oslo Børs VPS to beat NASDAQ's offer; Oslo Børs VPS to stick with NASDAQ), UBS [UBSG.CH] +1.5% (reportedly revamps pay policy involving variable bonuses, impacting 10K workers), Unicredit [UCG.IT] +2.5% (executives comments ECB capital requirements), Lok'nStore [LOK.UK] +3.5% (trading update)
• Healthcare: Smith and Nephew [SN.UK] -3.5% (reportedly NuVasive Inc has held talks to be acquired by Smith & Nephew for over $3B)
• Industrials: Airbus [AIR.FR] +2.5% (analyst action), Distribuidora Internacional de Alimentacion SA [DIA.ES] -2.5% (reportedly negotiating new loan)
• Technology: Stride Gaming [STR.UK] +6% (responds to press speculation)
• Materials: Acacia Mining [ACA.UK] -1% (earnings)

Speakers

• ECB's De Guindos (Spain): ECB to be prudent in setting policy. French yellow vest protests and German auto sector driving the economic slowdown. Reiterated General Council view that inflation to accelerate in the medium term. ECB to maintain favorable credit conditions. Reiterated Council view that ECB had not discussed extension of TLTRO; program would be analyzed in coming months
• China Foreign Ministry: No information available on Trump-Xi meeting plans
• China FX Regulator SAFE reiterated stance that expect overall FX Reserves to remain stable in 2019
• UAE Energy Min (OPEC president) Mazrouei saw oil market balanced in Q1 and added that no additional action was necessary from OPEC+ at this time
• Venezuela Oil Min Quevedo stated that wanted to maintain stability and balance in oil market. Would continue to trade with India and wanted to sell more oil to the country

Currencies/Fixed Income

• EUR/USD was softer for the 6th straight session and currently testing below the lower level of the 1.13-1.15 trading range. Dealers taking note of the increasing talk of a slowdown in Europe with all eyes Q4 GDP report in Germany on Thursday
• GBP/USD was softer by 0.2% with the continued Brexit issues remaining on the front burner. Dealers believe that PM May would likely request more time before she puts her deal to a fresh vote in Parliament while she has more talks with the EU. If there was no fresh meaningful vote by February 27th then PM would allow Parliament to vote on alternatives. The session saw a string of String of disappointing UK data with Q3 Preliminary GDP, Dec production data and Dec Trade balances all missing expectations.
• USD/JPY above the 110 level as market took a more optimistic outllok of the upcoming US-China trade talks

Economic Data

• (NO) Norway Jan CPI M/M: -0.5% v -0.3%e; Y/Y: 3.1% v 3.3%e
• (NO) Norway Jan CPI Underlying M/M: -0.7% v -0.5%e; Y/Y: 2.1% v 2.3%e
• (NO) Norway Jan PPI (including Oil) M/M: +0.3% v -3.5% prior; Y/Y: 4.9% v 7.8% prior
• (DK) Denmark Jan CPI M/M: +0.2 v -0.3% prior; Y/Y: 1.3% v 0.8% prior
• (DK) Denmark Jan CPI EU Harmonized M/M: +0.2 v -0.4% prior; Y/Y: 1.2% v 0.7% prior
• (FR) Bank of France Jan Industrial (Business) Sentiment: 99 v 103e
• (CH) Swiss Jan CPI M/M: -0.3% v -0.2%e; Y/Y: 0.6% v 0.6%e; CPI Core Y/Y: 0.5% v 0.3%e
• (CH) Swiss Jan CPI EU Harmonized M/M: -0.6% v -0.2%e; Y/Y: 0.7% v 0.5%e
• (SE) Sweden SEB Swedish Housing-Price Indicator: 13 v 0 (nil) prior
• (SE) Sweden Dec Private Sector Production M/M: +0.9% v -0.8%e; Y/Y: 4.6% v 2.0%e
• (SE) Sweden Dec Industry Production Value Y/Y: 3.6% v 1.3% prior; Service Production Value Y/Y: 2.1% v 2.2% prior
• (CH) Swiss Total Sight Deposits w/e Feb 8th (CHF): 576.2B v 576.2B prior; Domestic Sight Deposits: 486.8B v 482.7B prior
• (CN) China Dec Foreign Reserves: $3.088T v $3.80Te; Gold reserves: 59.94M v 59.56M troy oz prior
• (UK) Q4 Preliminary GDP Q/Q: 0.2% v 0.3%e; Y/Y: 1.3% v 1.4%e
• (UK) Q4 Preliminary Private Consumption Q/Q: 0.4% v 0.3%e; Government Spending Q/Q: 1.4% v 0.5%e; Gross Fixed Capital Formation Q/Q: -0.5% v -0.2%e; Exports Q/Q: 0.9% v 1.0%e; Imports Q/Q: 1.3% v 1.0%e
• (UK) Q4 Preliminary Total Business Investment Q/Q: -1.4% v -1.0%e; Y/Y: -3.7% v -3.0%e
• (UK) Dec GDP M/M: -0.4% v 0.0%e; 3M/3M: 0.3% v 0.3% prior
• (UK) Dec Visible Trade Balance: -£12.1 v -£11.9Be; Overall Trade Balance: -£3.2B v -£3.0Be; Trade Balance Non EU: -£3.6B v -£3.8Be
• (UK) Dec Industrial Production M/M: -0.5% v +0.1%e; Y/Y: -0.9% v -0.5%e
• (UK) Dec Manufacturing Production M/M: -0.7% v 0.2%e; Y/Y: -2.1% v -1.1%e
• (UK) Dec Construction Output M/M: -2.8% v +0.1%e; Y/Y: -2.4% v +1.5%e
• (UK) Dec Index of Services M/M: -0.2% v 0.0%e; 3M/3M: 0.4% v 0.4%e

Fixed Income Issuance

• None seen

Looking Ahead

• (UR) Ukraine Central Bank Jan Minutes
• (UK) Brexit Sec Barclay with EU's Barnier
• 05:25 (BR) Brazil Central Bank Weekly Economists Survey
• 05:30 (DE) Germany to sell €3.0B in 6-month Bubills
• 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays)
• 06:00 (IL) Israel to sell bonds
• 06:45 (US) Daily Libor Fixing
• 07:00 (IN) India announces details of upcoming bond sale (held on Fridays)
• 08:00 (ES) Spain Debt Agency (Tesoro) announces size of upcoming issuance
• 08:00 (RU) Russia Dec Trade Balance: $18.2Be v $ 19.0B prior; Exports: $37.0Be v $40.5B prior; Imports: $22.0Be v $21.5B prior
• 08:00 (UK) Baltic Dry Bulk Index
• 08:30 (US) Revisions: Consumer Price Index
• 09:00 (FR) France Debt Agency (AFT) to sell combined €3.1-4.3B in 3-month. 6-month, 9-month and 12-month Bills
• 09:00 (MX) Mexico Dec Industrial Production M/M: +0.1%e v -0.6% prior; Y/Y: -1.6%e v -1.3% prior; Manufacturing Production Y/Y: 1.3%e v 1.4% prior
• 11:30 (US) Treasury to sell 3-Month and 6-Month Bills

The US dollar has broken sharply higher against the Japanese yen currency on Monday, with buyers slicing through the important 110.00 resistance level. If bulls can hold price above the 110.00 level, further technical buying towards the 110.80 level seems possible. The overall bullish objective of the inverted head and shoulders pattern would take the USDJPY towards the 111.40 level.

The USDJPY pair is strongly bullish while trading above the 110.00 level, key technical resistance is found at the 110.40 and 110.80 levels.

If the USDJPY pair moves below the 110.00 level, sellers may test towards the 109.60 and 109.14 support levels.