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UK Parliament's Brexit Committee said today that the government cannot have a "managed no-deal" Brexit as its policy. The committee's chairman Hilary Benn said "having taken a wide range of evidence on the implications of a no deal Brexit, the committee is clear that this cannot be allowed to happen."

He added "MPs must be able to vote on extending Article 50 if Parliament cannot reach agreement on a way forward before March 29."

The pair stands at the back foot in early Monday’s trading and holding in the lower side of multi-day 109.05/99 range, after Friday’s attack at range top was rejected again and capped by falling 30SMA. No clear direction signal seen while the pair holds in extended congestion, with mixed setup of daily studies, adding to neutral mode. Break below range floor would initiate bearish scenario and risk dip towards 108.07/107.76 (broken Fibo 38.2% of 113.70/104.59 / 10 Jan trough). Conversely, initial bullish signal could be expected on break above range ceiling and Fibo barrier at 110.22 (Fibo 61.8% of 113.70/104.59) that would open way towards 200SMA (111.23).

Res: 109.57; 110.00; 110.22; 110.47
Sup: 109.26; 109.05; 108.60; 108.07

German DAX made a recovery in five waves, up from the 10280 level which we labelled as wave 1 of a higher degree. Ideally a top has been posted for sub-wave v of 1 at the 11255 level, from where a three-wave correction started to unravel. This three-wave pullback can later look for support and a new bullish recovery near the 10818/10675 region.

German DAX, 4h

GOLD faces further bull pressure towards region 1,309.29 following its strong rally on Friday. On the downside, support comes in at the 1,290.00 level where a break will turn attention to the 1,280.00 level. Further down, a cut through here will open the door for a move lower towards the 1,270.00 level. Below here if seen could trigger further downside pressure targeting the 1,260.00 level. Conversely, resistance resides at the 1,307.00 level where a break will aim at the 1,320.00 level. A turn above there will expose the 1,330.00 level. Further out, resistance stands at the 1,340.00 level. All in all, GOLD looks to move further higher on correction.

EUR/USD has steadied in the Monday session, after posting sharp gains on Friday. Currently, the pair is trading at 1.1413, up 0.07% on the day. On the release front, there are no major eurozone or German events. ECB President Mario Draghi will testify before the European Parliament Economic and Monetary Affairs Committee. The markets will be looking for hints about future monetary policy. On Tuesday, the U.S. releases CB Consumer Confidence, which is expected to drop to 125.0 points.

German economic data continues to raise concerns. On Friday, German Ifo Business Climate dipped to 99.1, below the 100-level for the first time since 2010. Earlier in the week, a ZEW survey found that institutional investors remain deeply pessimistic about the German and eurozone economies. There was also grim news from the manufacturing front, as German manufacturing PMI slipped to 49.9, falling into contraction territory for the first time since 2013. As the largest economy in the eurozone, Germany is a bellwether for the rest of the bloc, and if the soft numbers continue, investors could lose their enthusiasm for the euro.

The U.S. dollar retreated on Friday, after a breakthrough in the U.S. government shutdown crisis. President Trump agreed to reopen government services for a 3-week period, even though he did not receive any funds for his border wall with Mexico. Risk sentiment jumped, as investors are optimistic that the temporary deal will lead to an agreement which resolves the shutdown. Equity markets climbed on Friday, and EUR/USD surged over 1.0 percent.

There were no surprises from the ECB on Thursday, as the central bank maintained policy as well as guidance for “rates to remain at their present levels at least through the summer of 2019”. With the ECB finally winding up its massive stimulus scheme, market focus has shifted to the timing of a rate hike. However, with the eurozone economy showing signs of weakness, we’re unlikely to see a rate hike before the fourth quarter, at the earliest. The ECB remains cautious, and said that risks “have moved to the downside”. This dovish stance indicates that the euro will not be receiving any support from the bank, and will have to rely on stronger data in order to attract investors.

The greenback weakened against a number of its counterparts, as investors focus on Fed’s interest rate decision on Wednesday. The market seems to be expecting the Fed to signal a possible pause of its interest rate hikes, which could explain the bearishness of the USD. Analysts point out that the USD direction is still downwards and the markets are to take notes of any possible signals, while others note that the Fed could keep rates unchanged this year given the state of economic growth worldwide. The reopening of the US government could have also contributed to the weakening of the greenback as its role as a safe haven could have been reduced. We could see the USD maintaining a bearish momentum in the short term, especially if the Fed signals a possible rate hike pause or if developments in the US Sino trade negotiations weaken the role of the USD as a safe haven as well. EUR/USD rallied on Friday and during today’s Asian session breaking consecutively the 1.1350 (S2) resistance line, the 1.1387 (S1) resistance level (both now turned to support) and tested the 1.1425 (R1) resistance hurdle. We could see the pair continuing to trade in a bullish market, should the USD weaken even further as no financial releases of particular importance are expected today for either side of the currency pair. Should the bulls continue to dictate the pair’s direction, we could see it breaking the 1.1425 (R1) resistance line and aim for the 1.1460 (R2) resistance hurdle. Should on the other hand, the bears take over, we could see it breaking the 1.1387 (S1) support line and aim lower.

Pound strengthens ahead of UK Parliament’s vote

The pound strengthened against the USD, ahead of UK Parliament’s vote on Tuesday for Theresa May’s revised Brexit plan. The strengthening of the pound was also fueled by a number of positive news reports from the UK and Europe which enhanced further hopes for Brexit. Analysts point out that the number of lawmakers which want a hard Brexit is falling and this is positive for the pound, at least in the short term. We maintain a bullish outlook for the sterling as long as positive headlines for Brexit continue to reel in. Cable also rose during Friday and today’s Asian session, breaking the 1.3175 (S1) resistance line (now turned to support). We see the case for the pair to continue to trade in bullish market as the upward trendline incepted since the 21st of January remains intact. Please note that the RSI indicator of the pair, in the 4 hour chart has surpassed the reading of 70, implying a rather overcrowded long position for the pair. Should the pair find fresh buying orders along its path, we could see it breaking the 1.3280 (R1) resistance line and aim for higher grounds. Should the pair come under the selling interest of the market, we could see it breaking the 1.3175 (S1) support line and aim if not break the 1.3070 (S2) support barrier.

Today’s other economic highlights

In today’s late American session, we get from New Zealand’s trading balance for December. As for speakers, ECB’s president Mario Draghi, BoE’s governor Mark Carney and Cleveland Fed President Loretta Mester speak.

As for the rest of the week:

On Tuesday, from the US we get the CB Consumer Sentiment for January and the UK parliament is to vote on Theresa May’s revised Brexit plan. On Wednesday, we get Australia’s CPI rate and France’s GDP for Q4, Eurozone’s consumer and economic sentiment and Germany’s HICP rate for January and the US GDP for Q4. Also on Wednesday, we get FOMC’s interest rate decision. On a busy Thursday, we get Japan’s industrial production growth rate for December, China’s NBS Mfg PMI for January, Germany’s retail sales for December, France’s CPI (EU Norm.) for January, Germany’s unemployment data, Eurozone’s GDP for Q4, the US Core PCE prices and personal consumption for December and Canada’s GDP for November. On Friday, we get from China the Caixin Mfg PMI for January, UK’s Mfg PMI for January, Eurozone’s CPI rate for January, the US Employment report and the US ISM Mfg PMI for January.

EUR/USD H4

• Support: 1.1387 (S1), 1.1350 (S2), 1.1305 (S3)
• Resistance: 1.1425 (R1), 1.1480 (R2), 1.1495 (R3)

GBP/USD H4

• Support: 1.3175 (S1), 1.3070 (S2), 1.2960 (S3)
• Resistance: 1.3280 (R1), 1.3372, (R2), 1.3470 (R3)

It's such a mess that even the apolitical Queen Elisabeth has weighed in, asking her kingdom to “seek out common ground and grasp the big picture.” A second Withdrawal Agreement (i.e. Brexit), not fundamentally different to the first, will be proposed on Tuesday. Prime Minister Theresa May has been using all her cards to get concessions from the European Union, while impatience among EU leaders builds. After two and a half years of talks, Brexit seems stuck at the same spot. So how will a proposed extension of the divorce deadline to year-end help anything?

It seems the EU might accept a “conditional extension” that would require the UK to provide realistic reasons for buying extra time. Such a request would need approval of the European Council, which is not planning to hold a special summit before March: this should push the British pound under heavy pressure as the existing Brexit deadline of 29 March nears. Meanwhile, the Bank of England is not expected to change its policy rate next week. It is expected to adopt a “wait and see approach” while communicating its readiness to intervene under any Brexit scenarios. GBP/USD is currently trading at 1.3156 (+3.27% year-to-date), heading along 1.3060 short-term.

Trading lull on slow news

Sentiment is weak today, as investors wait on sales forecasts for 2019. Attention will be on European Central Bank President Mario Draghi's speech before the European Parliament. Following last week's ECB meeting, Draghi will likely not provide new information. Earning reports are due from Caterpillar, Whirlpool, Celanese and AMG.

On Friday, the US dollar tumbled across all G10 currencies amid a broad risk rally. Equities ended last week in the green, thanks to a solid bounce back on Friday. The S&P 500 edged up 1% over the last 5 days, while the dollar index fell 0.65% to 95.80. On Monday morning, the mood has reversed as risk sentiment deteriorated. Equity futures headed South with the S&P 500 and the Eurostoxx 50 sliding 0.50% and 0.60% respectively; while the single currency edged down 0.05% against the buck. Safe-haven currencies were better bid on Monday morning: the Swiss franc rose 0.20% to 0.9920 and USD/JPY fell to 109.35, down 0.18% on the session.

The Aussie advanced further in Asian trading on Monday, in extension of last Friday's strong rally that generated positive signal on formation of bullish engulfing pattern on daily chart.

Bulls were also attracted with today's twist of daily cloud (0.7207) but gains were so far capped here.

Stronger Chinese yuan and increased risk appetite helped bulls, which broke and closed above a cluster of daily MA's (0.7125/70 zone) and improved near-term outlook.

Rising bullish momentum on daily chart underpins the advance, which eyes next pivotal barrier at 0.7235 (2019 high, posted on 19 Jan/near Fibo 76.4% of 0.7393/0.6706 descend). Broken daily MA's now mark support zone which needs to hold and keep bulls in play.

Return and lose below 0.7215 (30SMA) would weaken near-term structure and risk of last Thu/Fri 0.7075/80 double-bottom.

Res: 0.7203, 0.7235, 0.7263, 0.7302
Sup: 0.7170, 0.7159, 0.7143, 0.7125

Attempts to extend last Friday's strong rally (0.9%) in early Monday's trading faced strong headwinds from barriers at 1.1411/18 (20SMA / daily cloud top) and stays capped for now. Bullish outside day pattern formed on Friday generated reversal signal as strong recovery closed above 1.1396 pivot (Fibo 38.2% of 1.1569/1.1289 descend), but bulls are lacking strength to clear pivots at 1.1411/18 and 1.1429 (Fibo 50%/daily Kijun-sen). Daily MA'a are in mixed mode while north-heading indicators underpin, but sustained break above cloud top and Fibo 50% barrier is needed to signal bullish continuation and expose barriers at 1.1449 (100SMA) and 1.1462 (Fibo 61.8%). Solid support at 1.1377 (converged 10/55SMA's / daily cloud base) needs to hold and maintain bullish bias, while break here would generate negative signal and risk further easing.

Res: 1.1418; 1.1429; 1.1449; 1.1462
Sup: 1.1396; 1.1377; 1.1355; 1.1309

The EUR/JPY has formed the two important patterns.We should see a bounce from the zone where the arrows is pointing up.

124.60-70 zone could provide a bounce as V shaped reversal has already made a bounce and now we see a retracement. There is a triple confluence in the lower bottom where the arrow is pointing up. Targets for this move are 125.05 followed by 125.20. Final target is 125.50 as the Full ATR projection is slightly above D H3 that stands at 125.35. Partial profit taking is advised close to important above mentioned levels.