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The British pound has surged to its highest trading level against the US dollar since November 2018, after bulls easily broke through the 1.3030 resistance barrier on Wednesday. The GBPUSD pair now trades above its 200-day moving average and faces a key challenge from the 1.3095 resistance level. If bulls can move price above the 1.3095 level, further upside towards the 1.3170 level seems possible.

The GBPUSD pair is strongly bullish while trading above the 1.3030 level, key technical resistance is now found at the 1.3095 and 1.3170 levels.

If the GBPUSD pair falls under the 1.3030 level, a decline towards the 1.2990 and 1.2940 levels may occur.

The Australian dollar declined today after the country released its employment numbers. The data showed that in December, the employment change was 21.6K, which was better than the expected 16.5K. It was however lower than the 37K that was released in November. The unemployment rate fell to 5.0% from the previous 5.1%. On the negative side, the participation rate declined slightly from 65.7% to 65.6%. This data comes a day after the neighboring New Zealand released better-than-expected inflation numbers.

It will be an important day for the euro as the ECB concludes its first monetary policy meeting of the year. While the bank is not expected to raise interest rates, investors will be paying close attention to the forward guidance. Most importantly, they will want clarity on when the bank expects to raise interest rates. Last year, the bank said that a rate hike could come ‘through summer’. Therefore, investors will want clarity on this keeping in mind that the ECB has talked about the weakening EU economy. Other than the interest rates decision, investors will receive important manufacturing data from the EU.

The price of crude oil declined sharply after API released its inventory numbers. In the past week, the crude stocks in the United States rose by 6.55 million barrels. This was the first rise in inventories this year and was much higher than last week’s drawdown of more than 560K barrels. Traders will now focus on the data from the EIA, which is expected to show a drawdown of 42K barrels. Another important news event came from the US where Donald Trump is expected to recognize the head of Venezuela’s opposition party as the president. This is an important development because Venezuela has the biggest oil reserves in the world.

AUD/USD

The Australian dollar weakened despite positive jobs numbers. It reached an intraday low of 0.7120 from a high of 0.7170. On the hourly chart, the current price is below the short and medium-term moving averages. The force index has declined to the neutral rate, while the RSI seems headed to the oversold level. The price is also along the lower band of the Bollinger Bands. There is a likelihood that the downward momentum will continue today.

EUR/USD

The EUR/USD pair was little moved in the Asian session as traders waited to see the action of the ECB. As of writing, the pair was trading at the 1.1387 level. The pair has consolidated along these levels this week, which means that a major breakout could happen today. A dovish ECB could take the pair to below the 1.1340 level while a hawkish ECB will possibly take it above the 1.1450 level.

XTI/USD

The price of crude oil declined sharply in overnight trading after the release of inventory numbers. The XTI/USD pair declined to a low of 51.80 after reaching a high of 53.77 yesterday. On the hourly chart, the pair is below the 42 and 21-day moving averages, while the Relative Strength Index (RSI) is relatively unchanged at the 42 level. Today, traders will focus on the official data from the EIA. Signs that US companies are increasing production could take the pair much lower.

USDJPY has been stubbornly testing the 109.76 key obstacle over the past four days, the level it strongly rejected on August 20 to rally towards an 11-mongh high of 114.54. The short-term bias looks neutral to positive as the MACD keeps deviating above its red signal line to enter positive territory and the RSI continues to flirt with its 50-neutral mark.

A decisive close above 109.76 would open the door for the 50% Fibonacci of 110.48 of the downleg from 114.54 to 106.45. If the bulls manage to climb higher, resistance could next come in the crossroads of the 50-day simple moving average (MA) and the 61.8% Fibonacci, at 111.44. Another winning battle at this point could add more buyers into the market, sending the pair probably up to the 112.20 key mark.

In the negative scenario, the price could cross back below the 38.2% Fibonacci of 109.53 to meet support at 109, where the 20-day MA is currently placed. Steeper losses may also target the 23.6% Fibonacci of 108.36, while another leg lower could pierce the 107.76-107.50 area captured between the lows on January 10 and January 4.

Turning to the medium-term picture, USDJPY maintains in a bearish profile as long as the downfall from the 114.54 peak remains active. Chances for a recovery, though, seem to be decreasing as the 50-day and the 200-day MAs are coming closer to register a bearish cross after a year.

After a sharp recovery from their December lows, global equity markets are struggling for direction this week. If you're in the bullish camp, the U.S. earning season may support your views. The Dow Jones Industrial Average rose 171 points yesterday driven by surprise positive earnings from United Technologies, IBM, and Procter & Gamble. Whether this trend of positive surprises will continue remains in question, but it's likely that the Tech sector, which makes up more than a quarter of the S&P 500 market cap, will dictate the fate of U.S. equities.

If you are on the other side of the camp, there is a lot of news supporting bearish views. Slowing global economic growth, the unresolved U.S.-China trade conflict, the U.S. government shutdown, and Brexit drama are all sources of uncertainty dragging at sentiment.

Eventually one camp will win, but there isn't sufficient momentum on either side. This will likely lead markets to continue to be driven by daily news flows until one factor dominates. However, expect to see further moves of more than 1% up or down in the near future.

ECB Meeting

The European Central Bank meets today for what is likely to be the week's most significant risk event. Most of last year's focus was on how to shift from monetary easing to tightening. Back then it was expected that the European economy would be in better shape in the following years. However, the latest updates from the IMF shows that Europe may be under more pressure than the rest of the world. Recent economic data confirm such views with PMI's, sentiment surveys, inflation, and other wide sets of economic figures pointing south. Will ECB President Mario Draghi acknowledge the darkening clouds today? Moreover, what tools the central bank will use to offset the slowdown will determine the Euro's direction. Lowering growth and inflation projections may provide a sell signal to the Euro, but Draghi's speech today may have even more impact on the single currency.

Sterling soars after breaking above 1.30

Sterling saw its best daily performance since December 12 on Wednesday, rising 0.85% against the dollar, and has been the best performing major currency so far in 2019. The surge in the Pound was driven by beliefs that a no-deal Brexit will eventually be avoided and the chances of extending Article 50 look more likely. Although extending Article 50 doesn't mean a final solution to Brexit has been found, any news delaying the process and supporting avoiding a hard Brexit will be supportive of the Pound. If no negative surprises materialize, the currency may find further support on technical buying after GBPUSD broke above the 200-day moving average.

General Trend:

• Shanghai IT index outperforms in early trade
• China property index lags amid credit rating downgrade for Jiayuan International
• Wuhan Zhongnan Commercial to acquire EasyHome (backed by Alibaba) for CNY37.3B
• Australian market supported by gains in the energy sector
• Nikkei weighed down by declines in heavily weighted components (Fast Retailing, Softbank); Brokerage firms gain on M&A speculation
• Japan’s KDDI speculated to seek to acquire Kabu.com Securities
• Hynix rises over 4% after its earnings and outlook
• Japan Jan Manufacturing PMI hits lowest level since 2016, exports decline at strongest pace in 2.5 years
• Australia Dec unemployment rate unexpectedly declined, participation rate also dropped
• Aussie pares gain seen after labor data on plan by NAB to raise mortgage rates
• Aussie extends declines amid concerns about Australian individual said to be detained in China
• Bank of Korea cut growth and inflation forecasts (as expected), said not yet time to consider further easing
• New Zealand sold 2037 bonds with a less than 2.0x bid to cover
• China Commerce Ministry (MOFCOM) may hold weekly press conference later today
• Malaysia Central Bank rate decision seen later today, no changes expected
• US companies expected to report earnings on Thursday are American Airlines, Bristol-Myers, Freeport-McMoran, Intel, JetBlue, Norfolk Southern, Southwest Airlines, Starbucks, Union Pacific, WW Granger, Western Digital (includes after hours)
• SEMI Dec North America Billing index due after market close on Thursday (Jan 24th)

Headlines/Economic Data

Japan

• Nikkei 225 opened -0.4%
• (JP) JAPAN JAN PRELIM MANUFACTURING PMI: 50.0 V 52.6 PRIOR
• 6302.JP Discovered improper testing at unit
• 8703.JP KDDI said to consider investment of up to ¥100B in the company for a less than 50% stake; Kabu.com expected to be delisted after the bid - Japanese Press
• Follow Up: 9433.JP Confirms considering various options with Kabu.com, nothing decided yet
• 6501.JP Chairman: Nationalization by the UK gov't only path forward for stalled nuclear project - Japan press
• (JP) Japan Investors Weekly Net Buying of Foreign Bonds: +¥822.9B v +¥2.2T prior; Foreign Buying of Japan Stocks: -¥66.7B v -¥428.2B prior
• (JP) Japan MoF sells ¥1.0T v ¥1.0T indicated in 0.50% (prior 0.70%) 20-yr bonds; avg yield 0.467% v 0.543% prior; bid to cover 4.57x v 3.44x prior

Korea

• Kospi opened flat
• (KR) BANK OF KOREA (BOK) LEAVES 7-DAY REPO RATE UNCHANGED AT 1.75%; AS EXPECTED
• (KR) Bank of Korea (BOK Gov Lee: Not time to consider whether further policy easing is needed
• 660.KR Reports Q4 (KRW) Net 3.40T v 3.8Te, Op 4.4T v 5.1Te; Rev 9.94T v 10.3Te; expecting a weaker 2019, lower high end smartphone demand and data center demand
• (KR) North Korea leader Kim: will advance "step by step" toward the goal he reached with the United States - N. Korea media; Satisfied with the personal letter sent from President Trump and spoke highly of him for his "unusual determination and will" to settle issues confronting the two countries in their upcoming second summit
• (KR) South Korea Defense Min: Will soon decide with the United States whether their joint military exercises this spring should be conducted as scheduled – Yonhap
• (KR) Fitch affirms South Korea sovereign rating at AA-; outlook stable
• (KR) Bank of Korea (BOK) Inflation pressure to stay low on declining oil prices, weak demand side pressure; sees annual inflation at 1.6% and GDP at 2.6% in 2020
• 005380.KR Reports Q4 (KRW) Net -129.8B v +748Be; Op 501B v 775B y/y; Rev 25.7T v 25.9Te

China/Hong Kong

• Hang Seng opened +0.3%, Shanghai Composite +0.1%
• (CN) Pres Trump: US is doing well in trade talks with China; tariffs could go up if we don't reach a deal
• (HK) Hong Kong Chief Executive Lam said she is not optimistic any trade deal between the US and China will last - HK Press
• (CN) China PBoC Open Market Operation (OMO): Skips reverse repo operations for the 4th consecutive session; Net: CNY250B drained v CNY350B drained prior
• (CN) China PBoC sets Yuan Reference Rate: 6.7802 v 6.7969 prior
• (CN) China to crack down on certain health care violations - Local Media
• (CN) China PBoC auctions CNY100B in 28-day Treasury Deposits at 3.30%
• 83.HK Sold only 75% of flats offered despite reduction in price - SCMP
• (CN) China Vice President Wang Qishan: China's global influence is growing like never before - Davos comments

Australia/New Zealand

• ASX 200 opened flat
• (AU) AUSTRALIA DEC EMPLOYMENT CHANGE: 21.6K V +18.0KE; UNEMPLOYMENT RATE: 5.0% V 5.1%E (lowest level since May 2011)
• (AU) Australia Jan Prelim PMI Manufacturing: 54.3 v 54.0 prior; PMI Services: 51.0 v 52.7 prior; PMI Composite: 51.5 v 52.9 prior
• BKY.AU Gives Q2 update: received a number of favourable assessments from various regulatory bodies including two from the Nuclear Safety Council [+23%]
• (NZ) New Zealand sells NZ$200M v NZ$200M indicated in 2.75% April 2037 bonds, avg yield 2.6998%, bid to cover 1.2x
• NAB.AU Raises variable mortgage rates by 12-16bps, effective Jan 31st

Other Asia

• (ID) Indonesia Central Bank Gov Warjiyo: Difficult to say policy rate cut, to ensure liquidity will be ample, rupiah is still under valued

North America

• (US) Pres Trump reportedly mulling executive actions separate from an emergency declaration to fund a Mexican border wall – CNN
• (US) White House Economic Advisor Hassett: zero percent economic growth is possible in Q1 if govt shutdown continues - CNN interview
• (US) Reportedly Administration officials reportedly ask for data on the impact of a shutdown that goes into March - press
• (US) US House Tax Committee has cancelled Thursday's hearing related to the shutdown impact on the IRS and tax season after Treasury Sec Mnuchin declined to attend
• F Reports Q4 $0.30 adj v $0.39 y/y, Rev $41.8B v $41.3B y/y
• MSFT China said to block Bing search engine – FT
• AVA Hydro One and Avista mutually agree to terminate merger agreement; Hydro One to pay Avista a $103M termination fee
• CP Reports Q4 C$4.55 v C$4.25e, Rev C$2.0B v C$1.94Be

Europe

• (UK) Labour Leader Corbyn said to likely support bill to force govt to request Article 50 extension; Tory ministers secretly discussing plans to stop no-deal Brexit - UK's Telegraph; 19 Tory ministers have been holding secret meeting to discuss plans to stop no-deal Brexit
• Osram Licht [OSR.DE]: Reports prelim Q1 Rev €828M, -15% y/y, due to accelerated market decline, especially in Dec

Levels as of 12:50ET

• Hang Seng +0.3%; Shanghai Composite +0.3%; Kospi +0.6%; Nikkei225 -0.1%; ASX 200 +0.4%
• Equity Futures: S&P500 -0.0%; Nasdaq100 +0.1%, Dax +0.1%; FTSE100 +0.0%
• EUR 1.1378-1.1398; JPY 109.44-109.65; AUD 0.7103-0.7167;NZD 0.6772-0.6805
• Feb Gold -0.3% at $1,280/oz; Mar Crude Oil -0.5% at $52.33/brl; Mar Copper +0.1% at $2.66/lb

Short term Elliott Wave view in Gold suggests the rally to $1298.03 ended wave (W). The yellow metal is now correcting the cycle from August 16, 2018 low within wave (X) in 3, 7, or 11 swing. Internal of wave (X) is unfolding as a double three Elliott Wave structure where wave W ended at 1276.4 and wave X is in progress.

A double three is a combination of two corrective Elliott Wave structures. The link of the two structures has the label of W and X. Internal of wave W in this case is a zigzag Elliott Wave structure. Wave ((a)) of W ended at $1276, wave ((b)) of W ended at $1294.52 and wave ((c)) of W ended at $1276.40.

Wave X bounce is currently in progress to correct cycle from Jan 4, 2019 peak ($1298.03). The internal of wave X is unfolding as a zigzag. Wave ((a)) of X ended at $1286.53 and wave ((b)) of X ended at $1278.30. Expect Gold to extend higher in wave ((c)) of X towards $1288.7 – $1295.1 area before turning lower. As far as pivot at $1298.03 high stays intact, Gold can turn lower and continue to consolidate.

Gold 1 Hour Elliott Wave Chart

Market movers today

We have a more interesting day ahead of us after the quiet one yesterday. In Norway , we expect Norges Bank to stay on hold (10:00 CET). All in all, we think there is little reason for it to depart from its planned gradual normalisation of monetary policy and still expect it to signal the next hike will come in March.

Later at 13:45 CET, we have the policy announcement from the ECB and at 14:30 CET, ECB President Mario Draghi's press conference. We expect the debated growth risk assessment to take centre stage. At the previous meeting, the ECB coined the growth risk assessment as broadly balanced but moving to the downside. Since then we have seen a string of disappointing data. We expect questions from the audience on liquidity operations but no formal announcement until the March meeting (see ECB Preview - We assign 60% chance of ECB hike in December 2019 , 18 February).

In terms of data releases, preliminary PMIs for euro area and US are due out. In euro area, we expect the manufacturing PMI to have fallen further to 50.7 in January. Beyond headwinds from the German car industry and political risks in France, we think there are downside risks due to ongoing weakness in China, as well as weak external demand and fragile risk sentiments in financial markets.

Selected market news

Yesterday, markets traded sideways overall without any significant news. The overnight session in Asia continued its wait-and-see mode ahead of the central bank meetings today. However, the US equity markets ended on a stronger footing, as the earnings season has started. Both IBM and Procter and Gamble reported strong earnings.

Concerns about the growth implications of the US government shutdown have started to circulate. Yesterday, White House economic advisor Kevin Hassett cautioned that zero growth is possible should the shutdown continue through March, followed by 'humongous' growth once the shutdown ends. Later, media reports suggested that the Democrats may grant President Trump his USD5bn-plus budget request to increase border security. However, those funds are said not to be used to build a wall but 'only' to increase border security.

On the political front, the grasp for power continues in Venezuela. President Trump (among others) quickly recognised opposition leader Juan Guaidó as President after he declared himself the leader. Venezuelan bond yields declined on the outlook for a regime shift.

The annual meeting in Davos is well underway. We note that Germany's Angela Merkel, Japan's Shinzo Abe and China's Wang Qishan all defended globalisation while also calling for an end to the trade wars.

For the 24 hours to 23:00 GMT, the EUR rose 0.18% against the USD and closed at 1.1383.

On the data front, Euro-zone's flash consumer confidence index rose to a level of -7.9 in January, compared to a revised level of -8.3 in the previous month.

In the US, the Richmond Fed manufacturing index climbed to a level of -2.0 in January, in line with market forecast and compared to a reading of -8.0 in the previous month. Moreover, the housing price index advanced 0.4% on a monthly basis in November, surpassing market expectations for a rise of 0.3% and compared to a revised similar rise in the prior month. On the contrary, the MBA mortgage applications dropped 2.7% on a weekly basis in the week ended 18 January 2019, following a surge of 13.5% in the prior month.

In the Asian session, at GMT0400, the pair is trading at 1.1388, with the EUR trading slightly higher against the USD from yesterday's close.

The pair is expected to find support at 1.1361, and a fall through could take it to the next support level of 1.1335. The pair is expected to find its first resistance at 1.1404, and a rise through could take it to the next resistance level of 1.1421.

Moving ahead, the European Central Bank's (ECB) monetary policy meeting, due later in the day, will be closely watched for further hints on future course of action as the central bank is widely expected to keep interest rates unchanged. Additionally, investors would also focus on the manufacturing and services PMIs for January, set to release across the euro area in a few hours. Additionally, the US initial jobless claims data along with the manufacturing and services PMIs for January, slated to release later today, will be on investors' radar.

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

For the 24 hours to 23:00 GMT, the GBP rose 0.90% against the USD and closed at 1.3078.

On the macro front, balance of firms reporting total order book above normal declined to -1.0 in January, more than market expectations for a fall of 4.0. In the previous month, the balance of firms reporting total order book above normal had recorded a reading of 8.0.

In the Asian session, at GMT0400, the pair is trading at 1.3075, with the GBP trading marginally lower against the USD from yesterday’s close.

The pair is expected to find support at 1.2982, and a fall through could take it to the next support level of 1.2889. The pair is expected to find its first resistance at 1.3131, and a rise through could take it to the next resistance level of 1.3187.

With no macroeconomic releases in Britain today, investor sentiment would be governed by global macroeconomic events.

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

Daily Pivots: (S1) 1.3305; (P) 1.3338; (R1) 1.3378; More...

No change in USD/CAD's outlook and intraday bias remains mildly on the upside. Break of 38.2% retracement of 1.3664 to 1.3180 at 1.3365 will target 61.8% retracement at 1.3479. We'd look for strong resistance from 1.3479 to limit upside. On the downside, break of 1.3231 will likely resume fall from 1.3664 to 61.8% retracement of 1.2781 to 1.3664 at 1.3118.

In the bigger picture, the medium term rise from 1.2061 (2017 low) might continue further. But the structure of such rise 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).