Sample Category Title

Pivot (invalidation): 1.1335

Our preference Short positions below 1.1335 with targets at 1.1290 & 1.1270 in extension.

Alternative scenario Above 1.1335 look for further upside with 1.1355 & 1.1380 as targets.

Comment As Long as the resistance at 1.1335 is not surpassed, the risk of the break below 1.1290 remains high.

• Rates: ECB remains in assessment mode
  Bunds outperformed US Treasuries yesterday, backed by soft EMU PMI's and an unconvincing ECB. The central bank remains in assessment mode going into the March policy meeting. Positive risk sentiment weighs somewhat on bonds this morning. We expect investors to stay sidelined ahead of next week's high-level trade talks and Fed meeting.
• Currencies: euro stays in the defensive on ongoing negative news flow
  Yesterday, EUR/USD declined further in the established range on poor eco data and as the ECB acknowledging downside risk to the economy. The next check for the euro comes with today's German IFO business release. Sterling continues its impressive rebound/short squeeze. EUR/GBP is testing the key 0.8620 support area

The Sunrise Headlines

• US stock indices closed yesterday's session overall on a positive footing with only the Dow Jones Index (-0.09%) losing little ground. Asian equities opened higher this morning and enlarge those gains throughout the trading day.
• The US Senate voted two rival bills down that could have re-opened the US government. Border wall funding remains the thorny issue. Trump is now open to a plan to re-open agencies, but only if a down payment on the wall is made.
• UK PM May and the Northern Ireland DUP party are said to be close to agreeing an amendment that would curtail the Irish backstop. The DUP is willing to back May's Brexit proposal, but only if the backstop has a specific time limit.
• ECB governor Benoit Coeuré said it's too early to say whether the central bank will hike rates in 2019. He added that guidance on interest rates could be altered if the economic slowdown proves more persistent.
• A Chinese delegation, incl. vice ministers, will travel to Washington on Monday to prepare for two days of high-level trade talks between Chinese Vice Premier Liu He and US Treasury Secretary Steven Mnuchin next Wednesday.
• Consumer inflation in Tokyo unexpectedly rose in January. The headline inflation gauge rose to 0.4%, up from 0.3% in December, beating consensus (0.2%). Core inflation (ex. fresh food and energy) rose to 0.7%, up from 0.6%.
• Today's economic calendar remains empty in the US (government shutdown). Germany prints January's IFO business sentiment. Fourth quarter earnings season continues while the ECB releases its survey of Professional Forecasters

Currencies: Euro Stays In The Defensive On Ongoing Negative News Flow

EUR/USD stays in the defensive. Sterling rallies

EUR/USD had a roller-coaster ride yesterday. European yields and the euro nosedived on disappointing EMU PMI's. EUR/USD dropped further at the start of the ECB press conference as Draghi put the risks to the ECB growth scenario to the downside. EUR/USD rebounded temporarily as the ECB president spook quite guarded on new TLTRO funding. The rebound was short-lived. EUR/USD tumbled briefly below the 1.13 handle on headlines that the German government will cut its 2018 growth forecast to 1.0% from 1.8%. At the same time, US economic adviser Kudlow spoke positive on the US-China trade talks and the US economy. EUR/USD finished the day at 1.1304 (from 1.1381). USD/JPY showed no clear trend an ended the session little changed at 109.64. Asian equities are rebounding further this morning even as uncertainty on several (geopolitical) topics still persists. Tokyo inflation data were slightly higher than expected, but the yen declines on the positive risk sentiment. USD/JPY is again moving toward the 110 barrier. EUR/USD still struggles not to slip below the 1.13 mark.

Today, the publication of the US data (orders, new home sales) is again postponed. In Europe, investors look out whether the German IFO survey confirms (or amends) recent negative news flow on the German economy. Is most of the bad news discounted? If so, the euro decline might slow. However, for that to happen, an unexpected positive surprise is probably needed. There will also again be plenty of headlines on the China-US trade talks ahead of next week's high level meetings. This week, we had a neutral bias on EUR/USD the pair had again returned in the 1.12/1.15 range after an upside test was rejected. The negative eco news flows on Europe caused the pair to drift lower in this range. First support at 1.1309 was temporarily broken. Next intermediate support comes in at 1.1270/67, ahead of the key 1.1216/1.1189 area. We still assume no sustained downside break.

After a brief pause yesterday morning, the sterling rally resumed. EUR/GBP is extensively testing the 0.8620 support area. This time, the move is triggered by press reports that the DUP party might be prepared to support an (amended) proposal of May's Brexit plan. Later today, the CBI retail data are also interesting. We find that the sterling rebound has gone far enough given that political event risk remains quite elevated. That said, the EUR/GBP stop losses trend is strong. For now, there is no reason to catch the falling knife until there is a clear technical sign

EUR/USD: testing downside support

The price of crude oil rose even after data from the EIA showed increased inventories. Over the past week, crude inventories in the United States rose by more than 7 million barrels. This was much higher than the expected drawdown of 42K barrels. Earlier in the day, the American Petroleum Institute (API) released data that showed an increase in inventories by 6.5 million barrels. Also, the price rose after Venezuela’s military came out in support of the embattled president, Nicholas Maduro. This continues to raise tensions in a country whose population appears to be supporting the opposition leader.

Sterling rose in overnight trading as Theresa May continues to face increased pressure to avoid the possibility of a no-deal Brexit. If the UK was to leave the EU without a deal, it would lead to significant challenges for the two sides. Yesterday, the CEO of Airbus released a video where he warned the country’s leaders that the company would leave the country in the event of a no-deal arrangement. This was an important warning coming from one of the biggest employers in the country. If the upward trend continues, it will be the best week for sterling in almost a year.

The euro will be back in focus today after yesterday’s decision by the ECB. The bank left rates unchanged as Draghi talked about the weakening of the economy and the challenges that it faces. Today, investors will receive key survey data. The German ifo Business Climate Index is expected to drop to 100.7 from the previous 101. The current assessment is expected to reduce to 104 from the previous 104.7. Other important numbers will be the total France job seekers and the Spanish PPI.

EUR/USD

After yesterday’s sharp declines, the EURUSD pair rose in overnight trading ahead of key survey numbers from Germany. It reached a high of 1.1325, which is moving from the lower Bollinger Band heading to the middle one on the four-hour chart. The signal line of the stochastic oscillator has started moving from the oversold level while the Average Directional Index has moved to the highest level in days. There is a likelihood that the pair will resume the downward trend.

GBP/USD

The GBPUSD pair rose sharply in overnight trading, erasing the losses made yesterday. On the hourly chart below, the pair’s price is above the three-week and six-week moving averages. It is also above the two-week adaptive moving average. The Relative Strength Index (RSI) has moved up to almost the overbought level of 70. There is a likelihood that the pair will push on with the momentum. However, traders should be careful because of a possibility of pullbacks.

USD/JPY

The USDJPY pair moved up ahead of key durable goods orders data from the United States. The pair reached an intraday high of 109.80, which is along the upper line of the Bollinger Bands. The level is also between the horizontal channel on the hourly chart shown below. The Bulls Power indicator is also rising as the Bears Power fades. There is a likelihood that the pair will continue the upward trend as it aims to reach to the important 110 level.

The GBP/USD is continuing with the uptrend as part of a wave 5 (orange) within wave A (green). A bearish reaction could take place at the top of the uptrend channel.

The GBP/USD bounced at the 38.2% Fibonacci retracement level of wave 4 vs 3 (green). The current push higher could complete wave A (green) or a wave 3 (dark red), which would indicate one more pullback and continuation towards the Fibonacci targets.

USDCAD stabilized within the 1.33 handle after Monday’s rally, with momentum indicators supporting that consolidation may continue in the short-term; the RSI has reversed down to meet its 50 neutral mark, the MACD has improved above its red signal line and towards zero, while the Ichimoku Indicators, (the red Tenkan-sen and the blue Kijun-sen lines) have moved sideways. The 20- and the 50-day simple moving averages (MA), though, which are set for a bearish cross, suggest that the downfall off 1.3663 may be more than temporary.

On the downside, the bears could meet immediate support around the 50% Fibonacci of 1.3221 of the upleg from 1.2781 to 1.3663, which they failed to overcome last week. If this prove a weak obstacle this time, the restrictive area around the previous low of 1.3179 should be another area to watch before the 200-day MA currently at 1.3100 comes into view. Any decisive close below that line could activate a stronger selling pressure.

Should the pair crawl above the 38.2% Fibonacci of 1.3325, the pair will likely retry to break resistance between 1.3370-1.3385. Slightly higher the 23.6% Fibonacci of 1.3455 could also halt upside movements, though, the 1.3600 round level is expected to be a bigger challenge as any violation at this point could reassure that the uptrend off 1.2781 is not over yet.

Turning to the medium-term picture, the rebound from the 1.3179 trough kept the market bullish in the three-month timeframe. A failure to hold above that mark would turn the outlook neutral while a rally above the 1.3663 peak would turn the market even more positive.

Daily Pivots: (S1) 0.8630; (P) 0.8678; (R1) 0.8705; More...

EUR/GBP drops to as low as 0.8617 and breached 0.8620 key support. At this point, we'd continue to expect strong support from 0.8620 to contain downside to bring rebound On the upside, above 0.8725 minor resistance will turn bias to the upside for 0.8763/8862 resistance zone first. However, sustained break of 0.8620 will resume larger decline from 0.9305 and target 100% projection of 0.9305 to 0.8620 from 0.9101 at 0.8416.

In the bigger picture, EUR/GBP is seen as staying in long term range pattern started at 0.9304 (2016 high). The medium term range is set between 0.8620 and 0.9101. Downside break out of 0.8620 will pave the way back to 0.8302/12 support zone. Break of 0.9101 will bring retest of 0.9304/5 resistance.

The British pound has broken above the key 1.3095 resistance level against the US dollar after reports surfaced that the Irish DUP party now support British PM Theresa May’s amended Brexit deal. If the GBPUSD pair holds above the 1.3095 level, buyers could start to test towards the 1.3170 level. The overall short-term upside target for buyers is likely to be the August 2018 trading high, which is located close to the 1.3300 level.

The GBPUSD pair is strongly bullish while trading above the 1.3095 level, key technical resistance is now found at the 1.3170 and 1.3300 levels.

If the GBPUSD pair trades back under the 1.3095 level, a decline towards the 1.3030 and 1.2990 levels may occur.

The euro currency is under heavy downside pressure against the US dollar on Friday after ECB President Mario Draghi struck a more dovish tone towards the eurozone economy at yesterday’s ECB policy meeting. A clear break below the 1.1300 level exposes the EURUSD pair to further technical selling towards at least the 1.1260 level. A bearish head and shoulders pattern is starting to emerge across the lower time frames.

The EURUSD pair is strongly bearish while trading below the 1.1300 level, key technical support is found at the 1.1260 and 1.1214 levels.

If the EURUSD pair moves above the 1.1360 level, buyers may test towards the 1.1380 and 1.1410 resistance levels.

Ethereum remains under downside pressure on Friday, amidst declining trading volumes and historically low trading ranges. Until a sustained break from the $110.00 to $125.00 price range occurs, narrowing trading conditions are likely to persist for the second largest cryptocurrency. The $92.00 level is likely to be sellers immediate target if the $110.00 level is broken.

The ETHUSD pair is only bullish while trading above the $125.00 level, key resistance remains at the 140.00 and $158.00 levels.

If ETHUSD pair trades below the $110.00 level, key support is found at the $100.00 and 92.00 levels.

Daily Pivots: (S1) 1.5878; (P) 1.5958; (R1) 1.6025; More....

Intraday bias in EUR/AUD remains neutral for consolidation above 1.5774 temporary low. Further decline is expected with 1.6154 resistance intact. On the downside, break of 1.5774 will resume the fall from 1.6765 and target 1.5346 key support. However, break of 1.6154 will turn intraday bias back to the upside for retesting 1.6765 instead.

In the bigger picture, the failure to sustain above 1.6587 key resistance (2015 high) argues that up trend from 1.1602 (2012 low) is not ready to resume yet. But still, as long as 1.5346 support holds, outlook will remain bullish. Break of 1.6765 will target 61.8% retracement of 2.1127 (2008 high) to 1.1602 at 1.7488 next. However, firm break of 1.5346 key support will indicate trend reversal, with bearish divergence condition in weekly MACD, and turn outlook bearish.