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Data from the Eurozone saw the release of the Sentix investor confidence. Data showed that investor confidence weakened for the sixth consecutive month. The investor confidence for the euro area fell to -3.7 from -1.5 in January which was the lowest reading since November 2014.

The current conditions index fell to 10.8 from 18 which was the lowest since December 2016. The current conditions index declined for the sixth consecutive month.

Meanwhile, UK's construction sector slowed. Growth eased in Australia's retail sales reportto reach a ten-month low. Data from IHS Markit showed that the construction PMI fell to 50.6 from 52.8 in December. The U.S. factory orders fell 0.6% on the month coming out worse than expected.

Earlier today, the Reserve Bank of Australia held its monetary policy meeting. As widely expected, the central bank left the main interest rates unchanged at 1.75%. Ahead of the RBA meeting, Australia's retail sales report showed a 0.4% decline on the month, which was worse than expected.

The European trading session today will see the release of Markit's services PMI for France, Germany, Italy and the Eurozone. The Eurozone service PMI should remain steady at 50.8.

The UK's services PMI report will also be coming out. Economists forecast that the services sector eased modestly to 51.1 from 51.2 in December.

The NY trading session will see the release of ISM's non-manufacturing PMI. Activity in the non-manufacturing sector should ease to 57.0 from 57.6 previously.

• Rates: Underperformance of US Treasuries; Trump’s State of the Union is a wildcard
  Risks for the US non-manufacturing ISM are tilted to the upside of expectations. Together with approaching US supply (3y-10y-30y), it could cause further underperformance of US Treasuries vs German Bunds. US President Trump’s State of the Union after the US bell is a wildcard for trading which could influence global markets via risk sentiment.
• Currencies: USD/JPY tries to regain the 110 barrier
  The dollar traded with a cautiously positive bias yesterday, mainly driven by technical considerations. Today, the US non-manufacturing ISM is interesting. However, last Friday’s strong US data didn’t help the dollar much. So, more consolidation in the major USD cross rates might be on the cards. The State of the Union of President Trump is a wildcard.

The Sunrise Headlines

• US equity markets gained ground yesterday with technology shares outperforming (Nasdaq +1.15%). Most Asian bourses are closed due to the Lunar New Year holiday. Australia (+1.95%) outperforms.
• The RBA left the policy rate unchanged at 1.50%, as expected. RBA governor Lowe said that the low level of interest rates will further support the Australian economy and bring the unemployment down and inflation closer to target.
• The Nikkei Japan PMI Composite declined to 50.9 in January, down from 52.0 because of a deteriorating manufacturing sector. The Nikkei Japan PMI Services rose from 51.0 to 51.6, spurred by a pick-up in domestic demand.
• The US special ambassador for North Korea will meet with North Korean officials on Wednesday in Pyongyang to prepare for a special summit later this month between US President Trump and North Korean leader Kim Jong Un.
• US President Trump is said to pick David Malpass as the US nominee to lead the World Bank. The choice for the senior Treasury Department official and Trump loyalist is portentous as he is a known sceptic of multilateral institutions.
• Venezuelan crude exports are declining sharply as President Maduro’s regime struggles to find buyers for the crude shipments after new US sanctions. The US restrictions are aimed to redirect crude revenues to opposition leader Guaido.
• Today’s economic calendar contains services ISM (US) & PMI’s (UK & final EMU) and EMU retail sales. Germany and the US sell bonds. President Trump delivers his State of the Union after the closing bell

Currencies: USD/JPY Tries To Regain The 110 Barrier

USD/JPY tries to regain 110 mark

In technical trade, the dollar drifted higher yesterday. There was little news to inspired global USD (FX) trading. US yields gained marginally, maybe still supported by strong US data on Friday and by upcoming US bond supply this week. However, the move was far from impressive as were the USD gains. USD/JPY broke temporarily above 110, but the attempt failed even as US equities rallied later. EUR/USD finished at 1.1438 (from 1.1456). USD/JPY closed at 109.89 (from 109.50 on Friday) Trading in in Asia shows no clear trend as several markets are closed. EUR/USD is currently trading in the 1.1435 area. USD/JPY (108.90) is losing a few ticks as a new attempt to regain the 110 level failed again. The Aussie dollar is in good shape. The AUD initially dropped to the 0.72 area on poor retail sales data. However, at its policy meeting, the RBA maintained a positive assessment on the economy. The impact of declining house prices on consumption spending remains a source of uncertainty. Still, the bank didn’t shift to an easing bias as some in the market had expected. AUD/USD is again trading in the 0.7260 area. The calendar contains the final EMU PMI’s and December retail sales today. The data are expected soft. In the US, the non-manufacturing ISM is expected at 57.1 (from 58.0). This is still a lofty level for this point in the eco cycle. We don’t see many reasons for a negative surprise. In theory this can be USD supportive, but the USD didn’t gain much on strong data last Friday. The 3-y auction and the State of the Union of President Trump are wild cards. Last week, the post-Fed USD decline halted soon, mainly due to poor EMU data. The subsequent USD comeback also had no strong legs. More sideways EUR/USD trading might be in the cards. Given the price action last week, we assume the EUR/USD downside to be rather well protected. USD/JPY maintains a constructive momentum. A break beyond the 110 resisistance would further improve the technical picture.

Yesterday, EUR/GBP hovered in the 0.8750/75 area for most of the day. The pair dropped temporarily on press headlines that the UK would not delay the import of EU goods in case of a no deal Brexit, but the move was very short-lived. This morning, BRC retail sales were OK. Later today, the services PMI is expected to ease to 51.0. A break below the 50 barrier might cause om sterling negative headlines. Brexit talks between the UK and EMU continue. However, a workable solution is not evident. A cautious BoE (Thursday) and a soft inflation outlook might also cap further GBP-gains

USD/JPY tries to regain the 110 barrier

Pivot (invalidation): 55.00

Our preference Short positions below 55.00 with targets at 54.10 & 53.65 in extension.

Alternative scenario Above 55.00 look for further upside with 55.65 & 56.10 as targets.

Comment The RSI is mixed and calls for caution.

Pivot (invalidation): 1315.50

Our preference Short positions below 1315.50 with targets at 1311.00 & 1308.50 in extension.

Alternative scenario Above 1315.50 look for further upside with 1319.50 & 1323.00 as targets.

Comment The RSI is mixed and calls for caution.

Pivot (invalidation): 2706.00

Our preference Long positions above 2706.00 with targets at 2727.25 & 2753.00 in extension.

Alternative scenario Below 2706.00 look for further downside with 2694.00 & 2675.50 as targets.

Comment The RSI calls for a new upleg.

Pivot (invalidation): 11100.00

Our preference Long positions above 11100.00 with targets at 11210.00 & 11280.00 in extension.

Alternative scenario Below 11100.00 look for further downside with 11050.00 & 11000.00 as targets.

Comment The RSI has just landed on its neutrality area at 50% and is turning up.

Pivot (invalidation): 5.2250

Our preference Short positions below 5.2250 with targets at 5.2020 & 5.1800 in extension.

Alternative scenario Above 5.2250 look for further upside with 5.2420 & 5.2730 as targets.

Comment The RSI shows downside momentum.

Pivot (invalidation): 0.7210

Our preference Long positions above 0.7210 with targets at 0.7270 & 0.7295 in extension.

Alternative scenario Below 0.7210 look for further downside with 0.7190 & 0.7175 as targets.

Comment The RSI is bullish and calls for further advance.

Daily Pivots: (S1) 142.87; (P) 143.52; (R1) 143.95; More...

Intraday bias in GBP/JPY remains neutral as consolidation from 144.84 is in progress. Above 144.84 will extend the rebound from 131.51. But we'd expect strong resistance from trend line (now at 147.17) 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.

Pivot (invalidation): 1.3140

Our preference Short positions below 1.3140 with targets at 1.3085 & 1.3065 in extension.

Alternative scenario Above 1.3140 look for further upside with 1.3165 & 1.3185 as targets.

Comment The RSI calls for a drop.