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The US dollar is staging a marginal recovery against the Japanese yen currency ahead of the release of the January Nonfarm payrolls jobs report from the United States economy. The USDJPY pair has so far found interim support from the 108.52 level, although the bearish head and shoulders pattern still remains valid. The next strong directional move in the pair will likely occur when the 108.52 to 109.14 trading range is broken.

The USDJPY pair is only bearish while trading below the 109.14 level, key technical support is found at the 108.52 and 108.10 levels.

If the USDJPY pair moves above the 109.14 level, buyers may test towards the 109.30 and 109.80 resistance levels

The British pound has moved sharply lower against the US dollar after the United Kingdom economy released much weaker than expected PMI Manufacturing data. The GBPUSD pair is now trading below the pivotal 1.3090 level and will likely test towards its current weekly trading low. The MACD indicator is also signalling further losses and has started to turn bearish.

The GBPUSD pair is bearish while trading below the 1.3090 level, key technical support is found at the 1.3055 and 1.3025 levels

If the GBPUSD pair trades above the 1.3090 level, key resistance is found at the 1.3130 and 1.3170 levels.

EURNZD has declined considerably over the last couple of days, posting a new seven-week low of 1.6526 on Thursday. The price slipped below the 38.2% Fibonacci retracement level of the upleg from 1.4535 to 1.7925 around 1.6630, while the 20- and 40-simple moving averages (SMAs) are ready to record a bearish crossover in the daily chart.

The MACD oscillator is slipping below the zero and trigger lines keeping its momentum negative, while the %K line of the stochastic oscillator recorded a bearish crossover with the %D line, in the oversold zone.

The next level for traders to have in mind is the 1.6330 support, before slipping towards the 50.0% Fibonacci mark of 1.6230. Lower still, the bears may aim for the 1.6140 support, reached on September 2017.

On the other side, a successful surpass of 38.2% Fibonacci region could drive prices higher towards the bullish crossover within SMAs currently at the 1.6785 level. Slightly above this area could send prices until 1.6940. Further upside pressure may meet again the 23.6% Fibonacci of 1.7125.

To sum up, the market is expected to hold bearish in very short-term and in the medium-term. A significant decline below 14-month low of 1.6330 could endorse the negative outlook in long term as well.

Nvidia’s stock opened with a gap lower on January 28, crossing back below its 50-day simple moving average (SMA). The fact that the price structure on the daily chart still consists of lower highs suggests that the medium-term picture remains cautiously negative, though a decisive break back above the 50-day SMA could turn it to a more neutral one.

Momentum oscillators concur, as the RSI is still below its neutral 50 level but is sloping up while the MACD has just crossed back below its red trigger line.

Assuming a break above the 50-day SMA, currently at 146.0, the next obstacle for the bulls may be the 161.0 zone, defined by the highs of January 25, with even steeper advances aiming for a test of 174.0, the December 3 peak.

On the flipside, another wave lower could encounter support around 131.0, which capped declines on January 29, with a break below that opening the way for the December 24 lows of 123.5. Even lower, that would mark a lower low, shifting attention to the 110.0 zone, marked by the top of March 2017.

Summing up, the picture remains cautiously negative, with a potential break below 123.5 needed to turn it decisively negative. However, a sustained move above the 50-day SMA would paint a more neutral short-term bias.

The US dollar is recovering against a basket of major currencies after a decline the day before. Investors are closely monitoring the trade relations between the US and China. Yesterday, the US President, Donald Trump, announced that he planned to meet with Chinese President, Xi Jinping, to reach a final agreement. Donald Trump expects an agreement to be reached by March. The US dollar index (#DX) closed in the positive zone (+0.29%). Today, investors' attention is focused on a report on the US labor market for January. Economists expect that key indicators may worsen. We recommend paying attention to the difference between the actual and forecasted values.

Yesterday, economic data were published in Germany, the Eurozone, Canada and the US. Thus, the unemployment rate in Germany decreased by 2K in January, while investors expected a decrease of 11K. Eurozone GDP counted to 1.2% (y/y) in December, as the experts expected. Canada GDP fell by 0.1% in November, which matched the investors' forecasts. New home sales in the US counted to 657K in November instead of 560K. Today, during the Asian trading session, Chinese Caixin manufacturing PMI has been published, which has counted to 48.3 and has been worse than the expected value of 49.5.

The "black gold" prices are consolidating. At the moment, futures for the WTI crude oil are testing the mark of $53.75 per barrel.

Market Indicators

• Yesterday, there was a variety of trends in the US stock market: #SPY (+0.88%), #DIA (-0.02%), #QQQ (+1.50%).
• The 10-year US government bonds yield fell again. At the moment, the indicator is at the level of 2.62-2.63%.

Economic Data on 01.02.2019:

• German manufacturing PMI at 10:55 (GMT+2:00);
• Preliminary data on inflation in the Eurozone at 12:00 (GMT+2:00);
• Data on the US labor market at 15:30 (GMT+2:00);
• ISM manufacturing PMI in the US at 17:00 (GMT+2:00).

European economic growth continues to show weakness: it grew 0.20% from the third to the fourth quarter of 2018 to post a yearly gain of 1.20%, a 5-year low and well below the European Central Bank forecast of 2%. There is little upside margin for EU growth. As Sino-American 2-day trade talks in Washington closed without fixes, aside from a letter of intent from China’s President Xi Jinping that confirms additional purchases of American soybeans, and the Brexit deadlock remains, the European economy will remain under pressure. France (0.30%) and Spain (0.70%) hardly grew in 2018 while the Italian economy faced a recession (-0.20%). Still, a stabilization of the EU economy is feasible if there is a positive US-China trade resolution and a soft Brexit. EUR/USD is currently valued at 1.1465, approaching 1.1440 short-term.

Weaker than expected UK Manufacturing PMI (Jan 52.8 vs 53.5 f/c and 54.2 Dec) hurt sterling and sparked fresh weakness in early European trading on Friday, following strong upside rejection previous day. Bearish daily candle with long upper shadow on Thursday was initial signal of recovery attempt stall, with subsequent bearish acceleration pressuring again key support of 200SMA (1.3049) which repeatedly contained dips earlier last week. Evident loss of bullish momentum support scenario, with sustained break below 200SMA expected further dent existing positive sentiment and trigger fresh weakness towards 1.2950 (20SMA), 1.2905 (100SMA), with extension towards 1.2856 (daily cloud top) not ruled out on stronger bearish acceleration. Ability to hold above 200SMA which marks strong support and entry point for renewed longs, would keep overall picture positive and maintain hopes for fresh advance. US NFP data could help if disappointing results further hurt dollar.

Res: 1.3114, 1.3160, 1.3199, 1.3217
Sup: 1.3049, 1.3000, 1.2950, 1.2905

Notes/Observations

• European Manufacturing PMI data mixed in session (Beats: Spain, Norway, Poland, Hungary; Misses: Germany Italy, UK, Netherlands; South Africa, Russia; in-line: Euro Zone, France, Sweden)
• Euro Zone Core CPI comes in above expectations while headline inflation remained below the ECB target level for the 2nd straight month
• Positive sound bites stemming from recent US-China trade talks helping risk appetite
• Focus on upcoming US jobs report for Dec (Note: furloughed govt workers in period will not be counted as unemployed since they will receive back pay)
• Chinese markets to be closed from Feb 4-8th for Lunar New Year holiday

Asia:

• China: US trade talks make important progress; China to expand imports of US services. To buy 'substantially' more agricultural and energy goods from the US. To improve cooperation on intellectual property rights (IPR) protection. Trump told China Vice Premier Liu He a US trade delegation led by USTR Lighthizer, Treasury Sec Mnuchin will visit China in mid-Feb for trade talks
• China Jan Caixin PMI Manufacturing registered its 2nd straight contraction and weakest reading in ~3-years (48.3 v 49.6e)
• Japan Jan Final Manufacturing PMI revised higher but still hitting a 29-month low (50.3 v 50.0 prelim)
• Japan Dec Jobless Rate better than expected and registered its 1st improvement in 3 months (2.4% v 2.5%e)
• South Korea Jan CPI hits a 1-year low (M/M: -0.1% v +0.4%e; Y/Y: 0.8% v 1.3%e)

Europe:

• UK Cabinet ministers said to be increasingly expecting a Brexit delay; about a third of the Cabinet expect an Article 50 extension
• Greece said to be lagging behind commitments to implement a series of prior actions needed for a post bail out tranche of €1.0B

Americas:

• President Trump: I think 'something will happen' on China trade deal; seeking a 'very big deal' with China; we'll either get a big deal with China or we'll postpone it for a little while. Believed could get China deal done by March 1st but 'might not be completely written down' by then; might need to extend past deadline to finalize details
• US Trade Rep Lighthizer: Believes progress had been made in China trade talks following had two intense days of discussions. To stayed focused on structural issues and enforcement

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +0.1% at 359.2, FTSE +0.7% at 7017, DAX 0.0% at 11178, CAC-40 +0.1% at 4997, IBEX-35 -0.4% at 9018, FTSE MIB +0.1% at 19753, SMI +0.1% at 8979, S&P 500 Futures flat]
• Market Focal Points/Key Themes: European Indices trade mixed amid a busy week for corporate earnings and positive comments from China Vice Premier Liu and US Trade Rep Lighthizer, commenting that they are hopeful of a trade deal. On the corporate front Deustche Bank trades lower after reporting a Q4 loss and Revenue which fell short of consensus. Novo Nordisk, Danske, DWS, JC Decaux rise on positive earnings; Electrolux is another notable riser on earnings and planned separation of group and spinoff. Meanwhile Signify trades lower after Revenues missed forecasts, Deutsche Wohnen also falls following a stake sale by Vonovia. In the US, Amazon shares weigh on the Nasdaq after the company guided light for the next quarter citing unfavorable currency headwinds. Looking ahead notable earners include Honeywell, Cigna, Merck, Exxon and Chevron among others.

Equities

• Energy: Fortum [FUM1V.FI] +2% (earnings)
• Healthcare: Novo Nordinsk [NOVOB.DK] +2% (earnings)
• Utilities: SSE [SSE.UK] +1.5% (divestment)
• Financials: Deutsche Bank [DBK.DE] -1.5% (earnings; CEO comments), Danske Bank [DANSKE.DK] +1% (earnings), DWS [DWS.DE] +0.5% (earnings), BBVA [BBVA.ES] +1% (earnings), Banco Sabadell [SAB.ES] +1.5% (earnings), CaixaBank [CABK.ES] -6% (earnings)
• Telecom: TalkTalk [TALK.UK] -7.5% (trading update)
• Industrials: Signify [LIGHT.NL] -4.5% (earnings), Electrolux [ELUXB.SE] +9.5% (earnings), Daimler [DAI.DE] +2.5% (analyst action)
• Technology: Sophos [SOPH.UK] -1.5% (Symantec earnings)
• Materials: Glencore [GLEN.UK] -0.5% (trading update)

Speakers

• German Justice Min Barley reiterated EU stance that did not see any other proposition for Irish border other than the backstop
• Ireland Mcentee reiterated stance that both the Ireland Govt and EU were clear that Brexit deal could not be reopened; technology was not the answer to the backstop issue. Extension of Article 50 would require asking what the delay would achieve but saw no point in asking for an extension if ended up in the same place 3 month later
• EU-27 member States said to give Britain visa-free travel even after a no-deal Brexit outcome
• Romania Central Bank's Daianu: Large rate hikes would harm the domestic economy
• India Acting Fin Min Goyal Budget Speech noted that it aimed to double farmers income by 2022. Forecasted FY19/20 budget deficit to GDP at 3.4%

Currencies/Fixed Income

• The USD was mixed against the major pairs but held to relatively tight ranges ahead of the US jobs report for January.
• The EUR/USD was fractionally higher at 1.1470 aided a bit in sentiment after Euro Zone Jan Core CPI came in above consensus. The headline inflation for the region remained below the ECB target level for the 2nd straight month.
• GBP/USD was softer by 0.2% and back below the 1.31 level as EU awaited clarify from the UK on what is desired by Britain to move towards conclusion of the Brexit process - USD/JPY was little changed as the yen did not sell off as sentiment on the recent US-China trade seemed positive
• The Italian 10-year BTP yield was higher by over 10bps with some chatter making the rounds that Italy govt would need to make added budget adjustments given the recent soft batch in data

Economic Data

• (IE) Ireland Jan Manufacturing PMI: 52.6 v 54.5 prior (68th month of expansion but lowest since Oct 2016)
• (RU) Russia PMI Manufacturing: 50.9 v 51.4e (4th month of expansion)
• (CH) Swiss Jan SECO Consumer Confidence: -4 v -5
• (TR) Turkey Jan PMI Manufacturing: 44.2 v 44.2 prior
• (SE) Sweden Jan PMI Manufacturing: 51.5 v 51.5e
• (CH) Swiss Dec Real Retail Sales Y/Y: -0.3% v 0.0%e
• (TH) Thailand Jan Business Sentiment Index: 50.0 v 49.5 prior
• (CN) Weekly Shanghai copper inventories (SHFE): 142.7K v 119.7K tons prior
• (FR) France Dec YTD Budget Balance: -€76.1B v -€95.6B prior
• (NL) Netherlands Jan Manufacturing PMI : 55.1 v 56.8e (65th month of expansion)
• (NO) Norway Jan PMI Manufacturing: 58.3 v 55.5e (7th month of expansion) 5e
• (PL) Poland Jan Poland PMI Manufacturing: 48.2 v 48.0e (3rd straight contraction)
• (HU) Hungary Jan Manufacturing PMI: 54.0 v 52.5e (38th month of expansion)
• (HU) Hungary Nov Final Trade Balance: €0.5B v €0.5B prelim
• (RU) Russia Narrow Money Supply w/e Jan 18th (RUB): 10.24T v 10.38T prior
• (ES) Spain Jan Manufacturing PMI: 52.4 v 50.5e (63rd month of expansion)
• (CZ) Czech Republic Jan PMI Manufacturing: 49.0 v 49.5e (2nd straight contraction and lowest since Jan 2013
• (CH) Swiss Jan PMI Manufacturing: 54.3 v 56.4e
• (IT) Italy Jan Manufacturing PMI: 47.8 v 48.8e (4th straight contraction and lowest since May 2013)
• (FR) France Jan Final Manufacturing PMI: 51.2 v 51.2e (confirmed move back into expansion)
• (DE) Germany Jan Final Manufacturing PMI: 49.7 v 49.9e (confirmed 1st contraction in 49 months and lowest since Nov 2014)
• (EU) Euro Zone Jan Final Manufacturing PMI: 50.5 v 50.5e(confirmed 67th month of expansion but lowest since Nov 2014)
• (GR) Greece Manufacturing PMI: # v 53.8 prior (20th month of expansion)
• (NO) Norway Jan Unemployment Rate: 2.6% v 2.5%e
• (ZA) South Africa Jan Manufacturing PMI: 49.9 v 50.5e (moved back into contraction)
• (UK) Jan PMI Manufacturing : 52.8 v 53.5e (30th month of expansion)
• (EU) Euro Zone Jan Advance CPI Estimate Y/Y: 1.4% v 1.4%e; CPI Core Y/Y: 1.1% v 1.0%e
• (DK) Denmark Jan PMI Survey: 51.1 v 57.5 prior

Fixed Income Issuance

• (IN) India sold total INR120B vs. INR120B indicated in 2021, 2027, 2031, 2035 and 2044 bonds
• (ZA) South Africa sold ZAR650M vs. ZAR650M indicated in I/ L 2029, 2033 and 2050 bonds

Looking Ahead

• (RU) Russia Dec Sovereign Wealth Funds: Wellbeing Fund: $58.1B prior
• (IT) Italy Jan Budget Balance: No est v €12.2B prior
• (RO) Romania Jan International Reserves: No est v $36.8B prior
• (ZA) South Africa Jan Naamsa Vehicle Sales Y/Y: % v 0.1%e
• 05:30 (PL) Poland to sell Bonds
• 06:00 (BR) Brazil Dec Industrial Production M/M: -0.1%e v +0.1% prior; Y/Y: -3.9%e v -0.9% prior
• 06:00 (UK) DMO to sell €4.0B in 1-month, 3-month and 6-month bills (£0.5B, £2.0B and £1.5B respectively)
• 06:30 (IN) India Weekly Forex Reserves w/e Jan 25th: No est v $396.7B prior
• 06:45 (US) Daily Libor Fixing
• 07:00 (BR) Brazil Jan PMI Manufacturing: No est v 52.6 prior
• 08:00 (CZ) Czech Jan Budget Balance (CZK): No est v 2.9B prior
• 08:00 (UK) Baltic Dry Bulk Index
• 08:00 (IN) India announces upcoming bill issuance (held on Wed)
• 08:00 (ES) Spain Debt Agency (Tesoro) announces of upcoming issuance
• 08:30 (US) Jan Change in Nonfarm Payrolls: +165Ke v +312K prior; Change in Private Payrolls: +175Ke v +301K prior; Change in Manufacturing Payrolls: +19Ke v +32K prior
• 08:30 (US) Jan Unemployment Rate: 3.9%e v 3.9% prior; Underemployment Rate: No est v 7.6% prior; Labor Force Participation Rate: 63.0%e v 63.1% prior
• 08:30 (US) Jan Average Hourly Earnings M/M: 0.3%e v 0.4% prior; Y/Y: 3.2%e v 3.2% prior; Average Weekly Hours: 34.5e v 34.5 prior
• 08:30 (CA) Canada Dec MLI Leading Indicator M/M: no est v -0.1% prior
• 09:30 (CA) Canada Jan Manufacturing PMI: No est v 53.6 prior
• 09:45 (US) Jan Final Markit Manufacturing PMI: 54.9e v 54.9 prelim
• 10:00 (US) Jan ISM Manufacturing: 54.0e v 54.1 prior; Prices Paid: 54.3e v 54.9 prior
• 10:00 (US) Nov Construction Spending M/M: +0.2%e v -0.1% prior
• 10:00 (US) Jan Final University of Michigan Confidence: 90.7e v 90.7 prelim
• 10:00 (MX) Mexico Dec Total Remittances: $3.0Be v $2.9B prior
• 10:00 (MX) Mexico Central Bank Economist Survey
• 10:30 (MX) Mexico Jan PMI Manufacturing: No est v 49.7 prior
• 11:00 (EU) Potential sovereign ratings after European close (Moody's on Finland; DBRS on Ireland)
• 12:00 (IT) Italy Jan New Car Registrations Y/Y: No est v 2.0% prior
• 12:00 (BR) Brazil Jan Tax Collections (BRL): No est v 141.5B prior
• 13:00 (MX) Mexico Jan IMEF Manufacturing Index: 49.5e v 49.3 prior; Non- Manufacturing Index: 49.5e v 49.4 prior
• 13:00 (US) Weekly Baker Hughes rig count data
• 14:00 (BR) Brazil Jan Monthly Trade Balance: No est v $6.6B prior; Total Exports: No est v $19.6B prior; Total Imports: No est $12.9B prior

Downside risks prevailed in the market on Thursday, thus sending the common European currency to breached both the 50-, 100-, and 200-hour SMAs and the 50.00% Fibonacci retracement level.

The exchange rate tested the 61.80% Fibonacci level at 124.44 during the Asian session on Friday. It is likely that the currency pair keeps moving down towards the weekly pivot point at 124.07.

In the meantime, it is expected that the currency exchange rate makes a brief retracement towards a resistance level formed by the combination of the 50– and 100-hour SMAs at 124.92 within this session.

The AUD/USD currency pair remained stable on Thursday, as it was trading near the upper boundary of a dominant descending channel during the previous trading session.

The exchange rate tested a support level formed by the 50-hour simple moving average at 0.7220 during the Asian session on Friday.

If the support line as mentioned above holds, a possible breakout through the upper boundary of the dominant descending channel pattern could be expected.

However, if the currency exchange rate passes the 50-hour SMA, a potential 60 pips movement south is a possibility.