Sample Category Title

The Euro remains in red for the third straight day and probed through daily cloud (1.1393/82) and 55SMA (1.1391) in early Wednesday's trading, as fresh negative signal came from downbeat German factory orders (Dec -1.6% vs 0.3% f/c).

Tuesday's close well below key supports at 1.1428 (Fibo 38.2% of 1.1289/1.1514) and 1.1417 (converged 10/20/30SMA's) further soured near-term sentiment after US President Trump's address to State of the Union sent dollar higher across the board.

Euro's bearish stance is boosted by rising negative momentum and daily MA's turning into bearish setup.

Bears need confirmation on close below daily cloud that would open way for test of next pivotal support at 1.1375 (Fibo 61.8% of 1.1289/1.1514) and extension towards 200WMA (1.1332).

Meanwhile, bears may take a breather on oversold stochastic, with broken diverging MA's marking solid resistance at 1.1413/17 and guarding broken Fibo level at 1.1428, which is expected to cap upticks and maintain bearish near-term bias.

A batch of US data, due later today, is in focus for fresh direction signals.

Res: 1.1400; 1.1417; 1.1428; 1.1436
Sup: 1.1375; 1.1342; 1.1332; 1.1300

The Aussie dollar fell sharply in Asia and extended weakness at the beginning of European session on Wednesday, making so far loss of 1.3%.

Comments from RBA Governor Lowe overnight, who opened the door for possible rate cut that prompted investors out of the Aussie positions.

Strong bearish acceleration surged through daily cloud and a cluster of daily MA's that presented strong support zone between 0.7205 and 0.7144, weakening near term structure for further weakness. With daily MA's now in bearish setup and south-heading momentum in the negative territory, focus turns towards next key supports at 0.7075/70 (25 Jan trough/Fibo 38.2% of 0.6706/0.7295 ascend) , violation ow which would produce strong bearish signal and expose psychological 0.70 support (also 50% retracement of 0.6706/0.7295).

Res: 0.7156, 0.7190, 0.7245, 0.7264
Sup: 0.7126, 0.7093, 0.7070, 0.7000

EUR/USD

Current level - 1.1385

The downtrend is intact, heading towards 1.1330 support zone. Crucial on the upside is 1.1440 resistance

USD/JPY

Current level - 109.67

The intraday bias is negative, as the pair is currently testing 109.60 static support and a break through that area will challenge 109.10.

GBP/USD

Current level - 1.2935

The violation of 1.3000 led to a slide to 1.2930 support and after a brief consolidation another leg downwards should follow, for 1.2800 area. Initial intraday resistance lies at 1.3000.

US futures are trading lower as dollar extends gain, losing some of their momentum from yesterday. Speaking from a technical analysis perspective, the S&P500 index still needs to break above the 200-day moving average, something which we have not seen since early December. Only 50% of the S&P500 stocks are trading above the 200-day moving average. Having said this, more than 80% of the S&P500 stocks are trading above their 50-day moving average. This confirms that the upward momentum (which we are experiencing for the past five consecutive days) is broadly supported by a large number of stocks rather just a handful number of stocks.

The S&P 500 is up 9.21% year-to-date, the NASDAQ index is up 11.51% YTD and the Dow Jones is up 8.93% YTD. There are some genuine concerns that the markets are moving higher without any strong volume behind them and a trend like this doesn't end well.

In terms of economic data, the US services industries are showing signs of slowing down. To put things in perspective, the non-manufacturing industries growth data touched a level not seen in the past two years, in other words, it was the lowest number in nearly 2 years. This is mainly due to the drop in the new orders which is due to the ongoing trade war between China and the US.

The ISM manufacturing number released yesterday also echoed a similar message and the drop in the reading (actual 56.7 vs forecast of 57.2) was mainly due to the fact that the effects of the tax cuts have started to fade away. Speaking of Trump, the president has called for immigration compromise yesterday but gave no new incentive to Democrats. This keeps the risk on the table about the possibility of another government shutdown.

Back in Europe, the chances of the European Central Bank offering new long term loans to banks are still not prominent because it doesn’t seem like that the bank is convinced for such a need. If this remains to be the scenario then the upcoming meeting, ECB meeting in March, could provide enough catalyst for the Euro to move higher.

Over in the U.K., there is one focus for sterling traders; if the policymakers are going to extend the Brexit timeline or no? There are reports that the Cabinet Ministers have secretly discussed the possibility of this but there is no public announcement as of yet. How long the Brexit can be delayed? Well, I think the Parliament easily go up to eight weeks.

• Aussie plummets as RBA Governor changes tune, puts rate cut on table
• Pound dives after weak services PMI reinforces speculation for dovish BoE
• US stock markets cruise to fresh two-month highs

RBA Governor reacquaints aussie with gravity

The Australian dollar is in freefall early on Wednesday, losing more than a cent against its US counterpart, following some cautious-sounding remarks from RBA Governor Philip Lowe earlier. He backpedaled on some of the Bank’s prior rhetoric that the next move in interest rates will likely be higher, indicating instead that the probabilities for the next rate move now appear “more evenly balanced”. He also mentioned that lower rates may be appropriate if the economy stalls, and that such an outcome would weaken the aussie.

Markets were likely caught off-guard by his cautious rhetoric, considering that just a day earlier, there were no signs the RBA is even contemplating a rate cut in the statement accompanying its policy decision. Consequently, the implied probability for a quarter-point rate cut by October soared to 68% from just 35% yesterday, according to pricing derived from Australia’s overnight index swaps. The next market mover for the aussie will likely be the Statement on Monetary Policy due on Friday, which will include updated forecasts for the Australian economy, and may thus provide some insights on the actual likelihood for a rate cut going forward.

Sterling crumbles under the weight of worrisome data

The British pound was the worst performer in the G10 FX space on Tuesday, after the nation’s services PMI fell by more than expected, amplifying concerns that economic growth continues to wane as Brexit uncertainties sap business confidence. The stark weakness in all three PMIs suggests the BoE may well strike a concerned tone when it meets tomorrow, as the whole premise of future rate hikes comes under question amid a weakening economy, Brexit or not.

Turning to politics, PM May will meet EU Commission chief Juncker on Thursday, in an attempt to reopen negotiations on the Irish backstop, something the bloc has refused repeatedly. The UK wants the backstop to have a time limit, or something similar, which the EU is highly unlikely to agree to. This implies there probably won’t be any meaningful progress by next Thursday, when the UK Parliament votes again, thereby keeping the risks surrounding the pound tilted to the downside until then. After that though, it will either be an explosion higher for sterling as Parliament either i) accepts the deal ii) extends the leave date iii) calls for a second referendum – or a massive drop lower as none of these happens and the probability of a no-deal exit soars.

US equities levitate to new two-month highs

US stock markets continued their steady climb yesterday, with the Nasdaq Composite (+0.74%) leading the charge. Meanwhile, Boeing’s high-and-rising stock (+3.32%) touched a fresh all-time high, helping the Dow Jones (+0.68), a price-weighted index, to outperform the benchmark S&P 500 (+0.47%). There was little in the way of fresh news behind the moves, with President Trump’s subsequent State of the Union address not providing anything of real substance for markets either.

The earnings season continues today with automaker General Motors releasing its quarterly results before Wall Street’s opening bell.

Coming up: US trade & New Zealand’s jobs data, Fed’s Powell speaks

Germany’s industrial orders for December are already out and disappointed massively, confirming that Europe’s growth engine remains stuck in low gear.

In the US, the trade deficit for November will finally be released; it was delayed owing to the government shutdown.

In New Zealand, employment data for Q4 are due. Markets continue to price in greater odds for an RBNZ rate cut rather than a hike this year, so these may be crucial for the kiwi. The results of the bi-weekly milk auction will also be released.

During the early Asian session on Thursday, Fed Chairman Powell (0000 GMT) and the Fed Board Governor Quarles (Wednesday, 2305 GMT) will both deliver remarks.

AUDJPY came under strong pressure on Wednesday, with the price reversing all the gains made earlier this month. The pair is currently testing the 200-period moving average (MA) in the four-hour chart and the bottom of the Ichimoku cloud but the RSI and the Stochastics warn that the downfall is overstretched, as the former is ready to touch the 30 oversold threshold and the latter is looking for a bullish cross below 20. Hence upside corrections cannot be ruled out in the short term.

A move northward may pause near the 78.80 restrictive level, where the 50-period MA is also standing at the moment. Slightly higher, the area around 79.45 could attract attention before all eyes shift to the six-week high of 79.82. Should the bulls break that top, resuming the uptrend that started from the 70.26 bottom, resistance could then run towards 80.70, taken from the low on December 10.

On the flipside, an extension below the 200-period MA could last until 77.54 which is the 23.6% Fibonacci of the upleg from 70.26 to 79.82. If the pair manages to clear this barrier, and specifically violate the previous low of 77.49, the sell-off could turn even stronger. In this case, the next targets could be the 38.2% and the 50% Fibonacci marks of 76.16 and 75.

Pivot (invalidation): 2714.75

Our preference Long positions above 2714.75 with targets at 2753.00 & 2774.25 in extension.

Alternative scenario Below 2714.75 look for further downside with 2697.75 & 2675.50 as targets.

Comment The RSI advocates for further advance.

Pivot (invalidation): 11290.00

Our preference Long positions above 11290.00 with targets at 11430.00 & 11480.00 in extension.

Alternative scenario Below 11290.00 look for further downside with 11206.00 & 11148.00 as targets.

Comment The RSI advocates for further advance.

Pivot (invalidation): 5.2060

Our preference Short positions below 5.2060 with targets at 5.1880 & 5.1750 in extension.

Alternative scenario Above 5.2060 look for further upside with 5.2240 & 5.2420 as targets.

Comment As Long as the resistance at 5.2060 is not surpassed, the risk of the break below 5.1880 remains high.

Pivot (invalidation): 0.7195

Our preference Short positions below 0.7195 with targets at 0.7140 & 0.7120 in extension.

Alternative scenario Above 0.7195 look for further upside with 0.7210 & 0.7225 as targets.

Comment The RSI is bearish and calls for further decline.