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The Australian Dollar depreciated about 143 base points against the US Dollar on Wednesday. The currency pair breached all major support levels during yesterday's trading session.

Currently, the exchange rate is located near the bottom border of a descending channel pattern at 0.7096 and could be set for a breakout.

If the currency exchange rate passes the lower boundary of the channel pattern, the next level for the pair will be near the weekly S3 at 0.7005.

However, if the junior descending channel holds, the pair could aim for a re-test of the resistance level at 0.7162 is a possibility.

The US Dollar appreciated about 94 base points against the Canadian Dollar on Wednesday. The exchange rate breached the 200-hour simple moving average at 1.3177 during yesterday's trading session.

The currency pair was moving towards the upper boundary of a junior ascending channel during the first half of Thursday's session.

Most likely, the currency exchange rate will aim at a swing high of 1.3302 during the following trading session.

However, a resistance level formed by the upper boundary of the channel pattern at 1.3250 could prevent such a scenario to occur.

The New Zealand Dollar depreciated about 137 base points against the US Dollar on Wednesday. The currency pair breached a medium-term ascending channel pattern during yesterday trading session.

Given that a breakout had occurred, it is likely that the NZD/USD exchange rate will continue its decline today.

The potential downside target for the currency exchange rate will be near the lower boundary of a junior descending channel pattern at 0.6780.

Meanwhile, technical indicators suggest a bearish signal on the 4(H) time-frame chart.

The Aussie dollar trades within narrow consolidation following 1.8% fall on Wednesday, triggered by signs for possible rate cut, with negative sentiment reinforced by downbeat New Zealand jobs data that sent Kiwi dollar sharply lower and impacted Aussie too.

Bears are taking a breather above key supports at 0.7075/70 (25 Jan trough / Fibo 38.2% of 0.6706/0.7295), with oversold conditions and rising momentum, suggesting consolidative / corrective action before fresh attempts lower.

Strength of US dollar against its major counterparts also adds to negative near-term outlook.

Broken 30SMA (0.7147) marks initial resistance, with stronger upticks on profit-taking expected to hold below a cluster on converged MA’s (100/55/20 SMA at 0.7175 zone) and offer better selling opportunities.

Eventual break below 0.7075/70 pivots would expose psychological 0.7000 support (also daily Kijun-sen).

Traders would look for fresh signals, mainly from US/ China trade talks and technical, as initial impact from the central bank’s comments started to fade.

Res: 0.7113, 0.7147, 0.7175, 0.7193
Sup: 0.7092, 0.7070, 0.7000, 0.6931

Germany's DIHK Chambers of Industry and Commerce lowered 2019 growth forecast for the country to 0.9%, sharply down from 1.7%. It noted that "companies' outlook is getting clouded. Business expectations have significantly deteriorated in all economic sectors." And, "global trade conflicts are slowing business development, especially in the industrial sector".

In addition, DIHK warned that should exports to the UK drops by -10%, growth could slow further to 0.7%. In case of additional turbulence in the capital markets, growth could even slow to 0.5%.

Yesterday USD kept fortifying its positions against the basket of other currencies. The USD index (#DX) updated the local maximums and closed in the positive zone (+0.35%) The financial market participants are waiting for the next round of the US/China negotiations. Next week, the US Secretary of Treasury Steven Mnuchin and trading representative Robert Lighthizer. If the conflict is not resolved until March 1, the US will increase the import fees for the Chinese wares from 10% to 25%.

The New Zealand dollar is weakened after the publication of the weak labour market report. The employment level fell in the 4th quarter by 0.1% while the investors were expecting 0.3%. The unemployment level grew to 4.3% instead of 4.1%. The NZD is still under pressure after the comments by RBA.

Today the attention will be on the UK inflation report, as well as the Bank of England decision regarding the key interest rate. It is expected that the regulator will keep the key parameters of monetary policy without any changes. You should keep an eye on the Central Bank rhetorics and comments.

The price on oil started to descend. Right now the WTI futures are testing the 53.75 USD/barrel mark.

Market Indicators

• Yesterday the US stock market was in a bearish mood: #SPY (-0,13%), #DIA (-0,04%), #QQQ (-0,30%).
• The US Treasury bonds 10-year yield is at the 2.68-2.69% level.

The Economic News Feed for 07.02.2019:

• Bank of England decision on key interest rate – 14:00 (GMT+2:00);
• Number of primary unemployment benefits` applications in US – 15:30 (GMT+2:00).

In the Monthly Economic Bulletin, ECB noted again that growth risks surrounding growth outlook have "moved to the downside" on "persistence of uncertainties related to geopolitical factors and the threat of protectionism, vulnerabilities in emerging markets and financial market volatility." And, "ample degree of monetary accommodation" is still needed for the block.

In particular, ECB said downside risks to global activity have been increasing, and warned "further escalation of trade disputes could weigh on global growth." It acknowledged that postponement of US-China tariffs has "sent a positive signal". But "considerable uncertainty" remains to whether negotiations could lead to de-escalation.

For Eurozone, ECB said "incoming information has surprised to the downside". Also, growth in Eurozone foreign trade "appears set to decline further in the fourth quarter of 2018". And it described that "pace of euro area export growth slowed down substantially (to 0.1%) in the third quarter, whereas growth in imports eased (to 1.0%).". Net trade "exerted a drag on economic activity with a large negative contribution to GDP growth"

Full ECB Monthly Bulletin here.

Cable stands at the back foot in early Thursday's trading, ahead of key events: BoE interest rate decision, minutes of the previous meeting and quarterly inflation report, while UK PM May will meet EU leaders in attempt to agree changes in divorce deal, reached three months ago. Concerns about consequences of disorderly Brexit and recent strength of the US dollar, still driven by upbeat US jobs data, keep sterling under pressure. PM May will do her best to convince EU leaders to re-negotiate deal, while the BoE would be also heavily affected on risks on disorderly Brexit. The central bank is widely expected to stay unchanged today, while investors will be looking for more information about growth outlook and inflation. Technical studies are bearish and favor further weakness, as bears crack key support at 1.2904 (Fibo 38.2% of 1.2397/1.3217, reinforced by converged 100/30 SMA's). Sustained break here would trigger fresh bearish acceleration towards 1.2806 (55SMA) and 1.2786 (daily cloud top). On the other side, oversold stochastic and momentum entering positive territory may obstruct bears and delay final break below 1.2904 pivot. Broken 20SMA (1.2990) is expected to keep the upside protected and guard upper pivot at 1.3033 (200SMA).

Res: 1.2944, 1.2979, 1.2990, 1.3033
Sup: 1.2897, 1.2830, 1.2807, 1.2786

XAUUSD (1307.08): Gold prices closed bearish on Wednesday with price action extending the declines following a brief period of consolidation just below the resistance level of 1316 level. In the short term, a reversal could send gold prices to retest the previously held lows at 1310.25. As long as this level holds out as resistance, we could expect gold prices to test the next support that could be formed at 1303.05. The longer-term downside target in gold remains at 1280 level.

AUDUSD (0.7098): The Australian dollar extended the declines after price action broke past the lower support at 0.7191. The drops came after a brief period of consolidation between 0.7191 and 0.7292 levels of support and resistance respectively. The recent break down below the support could now see the Australian dollar extending the declines lower to test the support at 0.7022. A retest of this level to establish support could potentially mark the downside correction in prices. Alternately, any short term recovery in price could see the AUDUSD retesting the breached support level at 0.7191 to establish resistance.