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EURUSD recorded a stunning rally on Friday, hitting the 20-simple moving average (SMA) in the daily timeframe, paring the strong losses that it posted the day before. Currently, the pair is trading around the 1.1400 psychological level and the technical indicators are supportive of the neutral to bullish picture. The RSI indicator is trying to jump above the neutral threshold of 50, while the MACD oscillator is strengthening its positive momentum in the negative territory.

If the bulls manage to send prices above the 20-day SMA then the expectation is a touch of the 23.6% Fibonacci retracement level of the dowleg from 1.2550 to 1.1215, around 1.1530. A clear break above this area may pave the way towards the 1.1570 resistance barrier, taken from the high on January 10. An upside extension could confirm a forthcoming higher high in the short-term and challenge again the 1.1620 barrier.

On the flipside, a dip below the 40-day SMA would bring the pair within the 1.1265 – 1.1290 support zone. Steeper declines may set the stage for a retest of the 17-month trough of 1.1215, identified by the low on November 12.

To summarize, EURUSD turned the bullish outlook to a more neutral one in the medium term, after the penetration of the ascending trend line in the preceding week.

Daily Pivots: (S1) 0.9910; (P) 0.9943; (R1) 0.9963; More....

Intraday bias in USD/CHF remains neutral at this point. Consolidation from 0.9990 might extend lower. But downside of retreat should be contained by 0.9856 resistance turn support to bring another rally. As note before, corrective pull back from 1.0128 has completed at 0.9716 already. Above 0.9990 will extend the rise from 0.9716 to retest 1.0128 high.

In the bigger picture, USD/CHF drew strong support from medium term trend line and rebounded. That suggests rise from 0.9186 is still in progress. Break of 0.9963 will affirm this bullish case. Further break of 1.0128 will confirm up trend resumption and target 1.0342 key resistance. Nevertheless, break of 0.9716 will dampen this bullish view and at least bring deeper fall to 0.9541 key support.

Daily Pivots: (S1) 109.35; (P) 109.65; (R1) 109.85; More...

With 109.14 minor support intact, USD/JPY's rebound from 104.69 might still extend further to 61.8% retracement of 114.54 to 104.69 at 110.77. But in that case, we'd look for topping signal above there. On the downside, break of 109.14 minor support will be the first sign of completion of the rebound. Intraday bias will then be turned back to the downside.

In the bigger picture, while the rebound from 104.69 is strong, there is no change in the view that it's a corrective move. That is, fall from 114.54, as part of the decline from 118.65 (2016 high), is not completed yet. Break of 104.62 will target 100% projection of 118.65 to 104.62 from 114.54 at 100.51, which is close to 100 psychological level. Nevertheless, sustained trading above 55 day EMA (now at 110.82) will dampen this bearish view and turn focus back to 114.54 resistance instead.

Daily Pivots: (S1) 0.7107; (P) 0.7147; (R1) 0.7217; More...

Intraday bias in AUD/USD remains on the upside for 0.7235 resistance. Corrective pull back from there should have completed at 0.7076 and rise from 0.6722 is possibly resuming. On the upside, break of 0.7235 will confirm this bullish case and target 0.7393 resistance next. We'd expect strong resistance from there to limit upside. For now, in case of retreat, near term outlook will stays cautiously bullish as long as 0.7076 support holds.

In the bigger picture, the failure to sustain below 0.6826 (2016 low) suggests that the long term down trend is not ready to resume yet. But prior rejection by 55 week EMA indicates underlying medium term bearishness in the pair. Outlook will also bearish as long as 0.7393 resistance holds. On the downside, sustained break of 0.6826 will target 0.6008 (2008 low).

Daily Pivots: (S1) 1.3165; (P) 1.3264; (R1) 1.3314; More...

Intraday bias in USD/CAD remains on the downside for 1.3180 low. Fall from 1.3664 is possibly resuming. Break of 1.3180 will confirm this bearish case and target 61.8% projection of 1.3664 to 1.3180 from 1.3375 at 1.3076 next. In case of recovery, risk will remains on the downside as long as 1.3375 resistance holds.

In the bigger picture, structure of the medium term rise from 1.2061 (2017 low) is not clearly impulsive so far. Hence, we'd stay cautious on strong resistance from 61.8% retracement of 1.4689 (2016 high) to 1.2061 at 1.3685 and 1.3793 resistance to limit upside, and bring medium term topping. But in any case, medium term outlook will stay bullish as long as channel support (now at 1.3036) holds. Sustained break of 1.3793 will pave the way to retest 1.4689 (2015 high).

Dollar weakness remains the main focus in rather directionless markets today. The greenback suffered steep selloff last Friday on rumors that Fed would discussing cutting short the balance reduction process. And Dollar will face a number of key events this week. FOMC meeting is for sure a highly anticipated one. In addition, US-China trade talk will resume. Non-farm payroll will be released, plus possible a number of missed economic data too.

As for today so far, Sterling is the weakest one, followed by Canadian Dollar. But both are just correcting some of last week's gains. The picture may change drastically ahead. On the other hand, New Zealand Dollar is the strongest, followed by Yen and then Swiss Franc, suggesting lack of direction in the risk markets.

Technically, two focuses will be on 0.7233 in AUD/USD and 1.3180 in USD/CAD. Break of these levels will confirm resumption of selloff in Dollar again the two currencies. GBP/USD's break of 1.3174 key resistance carries larger bullish implication. We'll see if GBP/USD could sustain above this level and extend the gain. Or, rebound in EUR/GBP from 0.8620 key support level would drag GBP/USD back below 1.3174.

In other markets, Nikkei closed down -0.60% at 20649. Currently, Hong Kong HSI is down -0.16%. China Shanghai SSE is down -0.17%. Singapore Strait Times is down -0.13%. Japan 10-year JGB yield is down -0.002 at -0.002, turned negative.

Trump: Less than 50-50 to make a border security deal

Trump reiterated his pledge for the border wall on Sunday and tweeted that "Does anybody really think I won't build the WALL? Done more in first two years than any President!" He also told WSJ that another government shut down is "certainly an option", as well as declaring national emergency.

On Friday, Trump conceded to Democrat's demand and agreed to a deal to end the partial government shutdown without the border wall. The Congress now has until February 15 for bipartisan negotiations on border-security plan. But Trump said ""I personally think it's less than 50-50" of making a border security deal.

May said to privately rule out no-deal Brexit

The Sun reported that UK Prime Minister has privately told the Cabinet that she will rule out no-deal Brexit. That came under influence of Remainer ministers and the under the worry that hard Brexit would cost UK lost of jobs. But for now, she won't do it publicly, as it could remove a key bargaining chip with EU.

Bob Sanguinetti, chief executive of the UK Chamber of Shipping, warned that "In the absence of a viable alternative to the Withdrawal Agreement, we continue to be heading for a no-deal scenario which is damaging, disruptive and chaotic to business, to manufacturers and consumers". And he urged to "put aside party politics and in the moment of need that we find ourselves in, we need to look at the bigger picture and look at what is best for the country".

Separately, Brexiteer Boris Johnson wrote in Telegraph on Sunday, saying May is seeking legally binding change to the Irish backstop fro the EU. However, Ireland has already make it clear they won't accept any change to the current backstop agreement.

BoJ minutes: Momentum towards 2% inflation target was being maintained

In the minutes of December 19/20 BoJ monetary policy meeting, most members shared that "although it would take time to achieve the 2 percent price stability target, it was appropriate to persistently continue with the powerful easing under the current guideline for market operations as the momentum toward achieving 2 percent inflation was being maintained".

Regarding Japan's economic outlook, members "concurred that it was likely to continue its moderate expansion". And they "shared the recognition that domestic demand was likely to follow an uptrend". However, one member warned that "exports, including those to China, had been weak as a whole". Another member pointed to "increasing number of firms held cautious views, mainly against the background of the prolonged US-China trade friction".

On prices, members shared the recognition that "CPI continued to show relatively weak developments compared to the economic expansion and the labor market tightening". But most agreed that CPI was "likely to increase gradually toward 2 percent".

Busy week ahead with US-China trade talk, FOMC, NFP, Brexit, Eurozone GDP...

It's a very busy week ahead. In the US, vice ministerial trade talk with China will start on Monday, in preparation for meeting between Chinese Vice Premier Liu He and US Trade Representative Robert Lighthizer on January 30/31. FOMC is expected to keep interest rate unchanged but main now formally adopt a more flexible stance on monetary policy. Non-farm payroll report, with wage growth eyed, will be the usual focus at the start of the month on February 1. And some more data could be released as US government is back to normal after the historical shut down.

Brexit debate will resume in the Commons on Tuesday. Prime Minister Theresa May's so called plan B will be voted on. But the main focuses are on the amendments which should decide the way forward. In particular, business will look into to some form of assurance of no no-deal Brexit after voting on the amendments. UK will also release PMI manufacturing.

Regarding economic economic data, Eurozone GDP and CPI, China PMIs, Australia CPI, Canada GDP, New Zealand GDP, etc, could all be market moving . Here are some highlights for the week:

• Monday: BoJ minutes, corporate service price index; Eurozone M3
• Tuesday: New Zealand trade balance; Australia NAB business confidence; Swiss trade balance; US S&P Case-Shiller house price, consumer confidence;
• Wednesday: Japan retail sales, consumer confidence; Australia CPI; French GDP; German CPI, Gfk consumer climate, import prices; Swiss KOF economic barometer; UK M4 money supply, mortgage approvals; US ADP employment, pending home sales, FOMC rate decision;
• Thursday: BoJ summary of opinions, industrial production, housing starts; China PMIs; Australia import prices; German retail sales, unemployment; Eurozone GDP, unemployment rate; US Challenger job cuts, personal income and spending, jobless claims, Chicago PMI; Canada GDP, IPPI, RMPI;
• Friday: Japan unemployment rate; China Caixin PMI manufacturing; Swiss SECO consumer climate, retail sales; Eurozone PMI manufacturing final, CPI flash; UK PMI manufacturing; US non-farm payroll, ISM manufacturing

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.3165; (P) 1.3264; (R1) 1.3314; More...

Intraday bias in USD/CAD remains on the downside for 1.3180 low. Fall from 1.3664 is possibly resuming. Break of 1.3180 will confirm this bearish case and target 61.8% projection of 1.3664 to 1.3180 from 1.3375 at 1.3076 next. In case of recovery, risk will remains on the downside as long as 1.3375 resistance holds.

In the bigger picture, structure of the medium term rise from 1.2061 (2017 low) is not clearly impulsive so far. Hence, we'd stay cautious on strong resistance from 61.8% retracement of 1.4689 (2016 high) to 1.2061 at 1.3685 and 1.3793 resistance to limit upside, and bring medium term topping. But in any case, medium term outlook will stay bullish as long as channel support (now at 1.3036) holds. Sustained break of 1.3793 will pave the way to retest 1.4689 (2015 high).

Economic Indicators Update

Market movers today

A quiet start to a very busy week. Euro money and credit data is the main data of interest today. M3 growth is expected to rise slightly from 3.7% to 3.8%. Later today, ECB President Mario Draghi will speak at the EP but is unlikely to send any new signals compared to the ECB press conference last week.

Instead, all eyes this week will be on the high level US-China trade talks on Wednesday and Thursday. Negotiations are entering a crucial stage, where the thorny issues are likely to come up.

Other events this week will be: Brexit vote on Tuesday on Prime Minister Theresa May's Brexit Plan B. See today's Brexit Monitor: pressure is mounting. FOMC meeting Wednesday, Chinese PMI manufacturing Thursday (NBS) and Friday (Caixin) and US employment report and ISM manufacturing Friday, read more in Weekly Focus.

Selected market news

On Friday, European markets digested the messages from the ECB meeting on Thursday. European yields traded broadly sideways while equities ended in the green across the globe. The EURUSD ended the day around one big figure higher. This morning, positive sentiment dominates the Asian markets, which are generally trading in green.

The partial US government shutdown has ended, at least for three weeks, as US President Trump has given up the wall funding for now. Trump tweeted that the agreement was 'in no way' a concession to the democrats. Talking to the WSJ over the weekend, he said that he sees a less than 50/50 chance of a border wall by the deadline, which could force him to use emergency powers.

After mixed signals from Treasury Secretary Steven Mnuchin and Secretary of Commerce Wilbur Ross on Thursday, the US-China talks on Wednesday-Thursday will be key. China's top trade negotiator, Vice PM Liu He, will meet with US Trade Representative Robert Lighthizer and Mnuchin in Washington. The talks are likely to centre on some of the tough issues in the trade negotiations, such as the Made in China 2025 plan, protection of intellectual property rights (IPR), forced technology transfer and non-tariff barriers.

On Friday, we also had a few ECB speakers out. Most prominent were board member Benoit Coeuré and French central bank governor Villeroy who both stressed that a new liquidity operation would be due to a monetary policy reason. Furthermore, downward revisions of ECB projections were probable. On a side note, Coeuré, who has been mentioned as a potential candidate to replace ECB President Mario Draghi in October, replied rhetorically, 'who wouldn't' accept the ECB presidency if asked.

The German IFO business climate took another dip in January to 99.1, driven mainly by the weaker business expectations dropping from 97.3 to 94.2. Similar to the PMI release on Thursday, the Ifo is signalling that the German economy had a soft start to the year and that a rebound is not yet in sight.

General Trend:

• Securities brokers decline in Japan
• Nissan drops on speculated US SEC probe related to executive compensation
• Shanghai composite supported by the banking, telecom and tech sectors
• Shanghai property index underperforms in early trade
• Iron ore futures rise over 5% in China, Vale dam accident cited
• Commodity currencies extend gains from Friday amid Fed speculation, China/US talks in focus
• Yuan (CNY) fixed stronger ahead of trade talks
• China Vice Premier Liu He expected to visit the US this week for trade talks (Jan 30-31st)
• Trump suggested that temporary agreement to reopen US government might not last
• Various HK property companies (including Jingrui Holdings) seek to issue US dollar denominated bonds for refinancing purposes
• US companies due to report earnings on Monday are AK Steel, Caterpillar, Celenese and Whirlpool (includes afterhours)

Headlines/Economic Data

Japan

• Nikkei 225 opened -0.1%
• (JP) Japan labor data scandal has spread, investigation showed 40% of key economic stats may contain errors – Nikkei
• (JP) Qatar Amir starts 3 day visit to Japan, expected to call on the Japanese government and businesses to boost economic cooperation – press
• (JP) JAPAN DEC PPI SERVICES Y/Y: 1.1% V 1.2%E
• (JP) Japanese real estate transactions down 34% in H2 2018; Chinese slowdown cited as cause - Japan press
• (JP) Bank of Japan (BOJ) Monetary Policy Meeting Minutes for Dec 19-20th (2 meetings ago): Most - appropriate to continue easing persistently
• 8591.JP Reports 9M Net ¥236.2B v ¥256.4B y/y, Op ¥258.1B v ¥189B y/y; Rev ¥1.80T v ¥2.19T y/y

Korea

• Kospi opened +0.3%
• (KR) South Korea financial regulator: Will increase monitoring of banks and other financial institutions to further slow the growth of household debt
• (KR) South Korea 2018 private consumption +2.8% (7-yr high) v 2.6% y/y – Yonhap
• (KR) South Korea Defense Min Jeong Kyeong-doo orders Navy to sternly deal with the repeated low altitude flybys by Japan warplanes; calling them a serious provocation by an ally – Yonhap
• (KR) North Korea urges South Korea to end military drills, they can hurt the current mood of peace and dialogue on the Korea peninsula – Yonhap
• 005380.KR Affiliate Hyundai Autoever given prelim approvals for IPO in South Korea

China/Hong Kong

• Hang Seng opened +0.5%, Shanghai Composite +0.5%
• (CN) China Dec Industrial Profits y/y: -1.9% v -1.8% prior (1st consecutive decline since Jan 2015); YTD y/y: +10.3% v 11.8% prior
• 486.HK US Treasury removes Rusal from sanction list following deal for Deripaska to reduce stake
• (CN) China Govt replaces CSRC chairman Liu Shiyu with Yi Huima – Xinhua
• (HK) According to HKET existing home sales in Hong Kong over the weekend were the highest in 41 weeks
• (CN) Three mainland Chinese companies have missed a combined CNY2.5B in debt repayments over the past 2-months despite apparently high cash holding – SCMP
• (CN) China Premier Li: China's economy has enough resilience, potential and ample room for growth, especially with a huge domestic market and rich human resources of nearly 1.4B people, therefore, we are fully confident and capable of keeping economic growth rate within an appropriate range in spite of multiple risks and challenges in 2019 – Xinhua
• (CN) China PBoC Open Market Operation (OMO): Skips reverse repo operations for the 6th consecutive session; Net: CNY0B drain v CNY10B drained prior
• (CN) China PBoC sets Yuan Reference Rate: 6.7472 v 6.7941 prior (strongest setting since July 19, 2018)

Australia/New Zealand

• ASX 200 closed for holiday
• SML.NZ Cuts 2018/2019 milk price forecast to $6.25 kgMS (prior $6.75) (in line with press speculation)

North America

• (CA) Canada ambassador to China John McCallum fired over comments that were seen supporting detained Huawei CFO Meng Wanzhou – Nikkei
• FB Recently unsealed documents from 2016 lawsuit show FB's internal response to children unknowingly charging parents' credit card and employees referring to the kids as "whales" in terms of money making
• (US) President Trump signed deal funding the Govt to Feb 15th, so talks can continue on the border wall
• VALE Suspends dividend, share buyback and executive bonuses due to most recent dam failure - filing
• (VE) US Sec State Pompeo: now is the time to pick a side on Venezuela - UN Security Council session

Europe

• TSCO.UK Union calling for a meeting with co, amid fears Tesco is planning to layoff 15,000 workers and affect over 730 stores – FT
• SIE.DE EC Commissioner Vestager confirms that Siemens and Alstom have offered new concessions - press
• (UK) Boris Johnson (Tory member): PM May planning to seek legally binding changes to Ireland backstop, will either insert time limit or an escape clause- Telegraph
• (UK) PM May told ministers she is not ready to rule out no deal Brexit, as it would remove bargaining chip with EU - UK press
• (EU) ECB's Knot (Netherlands): EU economy doesn’t show any signs of falling into a recession; talk of crisis or an European recession is somewhat premature - Dutch press

Levels as of 12:50ET

• Hang Seng +0.2%; Shanghai Composite +0.0%; Kospi +0.1%; Nikkei225 -0.6%; ASX 200 +0.7%
• Equity Futures: S&P500 -0.3%; Nasdaq100 -0.4%, Dax -0.2%; FTSE100 -0.2%
• EUR 1.1403-1.1427; JPY 109.27-109.58; AUD 0.7175-0.7205; NZD 0.6830-0.6873
• Commodities Futures: Gold +0.3% at $1,302/oz; Crude Oil -1.0% at $53.12/brl; Copper -0.7% at $2.71/lb

Government reopens but attention already elsewhere

Brexit votes, US/China trade talks, a Fed monetary policy decision and the US jobs report; this promises to be quite a week for financial markets.

And all of this comes as the US government ends a 35-day shutdown – the longest in history – after Trump agreed to sign a short-term spending bill, funding government for three week while negotiations on border security continue. It’s difficult not to see this as a bitter defeat for the President in the short-term, with polls indicating he was viewed as being more responsible for 800,000 workers going without pay.

With so much to focus on this week, it could get quite volatile in the markets. Wednesday’s Fed decision may be the least impactful of the lot, with the central bank having indicated that it’s going to take a more patient approach to tightening and with no fresh projections due until March, it may just sit this one out. There will be a press conference though which could be interesting, with Powell having agreed to do one after every meeting starting this year.

While the jobs report on Friday will always attract attention, the numbers are highly likely to be skewed by the shutdown so will be taken with a pinch of salt. That leaves the two big events this week, the vote in UK parliament on Theresa May’s plan B – and the amendments to it that are put forward – and the high level trade talks in Washington, with Vice Premier Liu He leading a delegation.

Investors have been paying very close attention to both of these events over a number of months and while the Brexit saga has primarily impacted domestic instruments – GPB, FTSE 100 and Gilts – albeit significantly at times, the trade war has had a wider and more significant impact on the markets overall. It could well be a very cagey week and all you have to do is look at Asia, where markets are relatively mixed to see that investors are taking a cautious approach to it. Europe also looks a little lower ahead of the start of the week.

Gold breaks $1,300

Gold finally managed to break through $1,300 on Friday, aided heavily by a decline in the dollar which typically benefits the yellow metal. The move came after a couple of weeks of the dollar paring losses, with positive momentum in trade talks between the US and China weighing on the greenback. With high level talks taking place later this week, the dollar will be vulnerable again if progress is made.

Oil running out of steam

Oil also benefited from the decline in the dollar on Friday and the bounce in risk assets, albeit to a lesser extent. It has been on a good run since Christmas but has clearly run out of steam and looks prone to a bit of a correction. If we do see this, then $59 and $50 look like key support levels below in Brent and WTI, respectively.

For the 24 hours to 23:00 GMT, the EUR rose 0.96% against the USD and closed at 1.1410 on Friday.

On the data front, Germany's Ifo business climate index declined to a level of 99.1 in January, falling to its lowest level since February 2016 and more than market consensus of a fall to 100.7. In the prior month, the index had recorded a level of 101.0. Moreover, the nation's Ifo business expectations index slid to a level of 94.2 in January, declining for the fifth straight month amid mounting fears over a no-deal Brexit. The index had registered a level of 97.3 in the prior month, while market participants had expected for a fall to a level of 97.1. Also, the Ifo current assessment index dropped to a low level of 104.3 in January, marking its lowest level since May 2017 and less than market anticipation for a decrease to a level of 104.2. In the prior month, the index had recorded a reading of 104.7.

In the Asian session, at GMT0400, the pair is trading at 1.1420, with the EUR trading 0.09% higher against the USD from Friday's close.

The pair is expected to find support at 1.1348, and a fall through could take it to the next support level of 1.1276. The pair is expected to find its first resistance at 1.1459, and a rise through could take it to the next resistance level of 1.1498.

Moving ahead, traders would closely monitor the European Central Bank President, Mario Draghi's speech followed by the Euro-zone's M3 money supply for December, slated to release in a few hours. Later in the day, the US Chicago Fed national activity index for December and Dallas Fed manufacturing activity index for January, will garner significant amount of investor attention.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.