Sample Category Title

Daily Pivots: (S1) 0.9961; (P) 0.9974; (R1) 0.9987; More....

With 0.9932 minor support intact, further rise is still expected in USD/CHF despite diminishing upside momentum. Current rise from 0.9716 should target a test on 1.0128 high next. On the downside, below 0.9932 minor support will turn intraday bias neutral again. But near term outlook will remain cautiously bullish as long as 0.9856 minor support holds.

In the bigger picture, current development suggests that rise from 0.9186 has possibly completed with three waves up to 1.0128 already. Decline from 1.0128 could either be correcting this move, or reversing the trend. As long as 0.9541 support holds, we'd slightly favor the former scenario, and expect another rise through 1.0128 at a later stage. However, sustained break of 0.9541 will confirm trend reversal and bring deeper fall back to 0.9186 low.

Daily Pivots: (S1) 1.1339; (P) 1.1356; (R1) 1.1377; More.....

EUR/USD continues to lose downside momentum as seen in 4 hour MACD. But further decline is expected with 1.1391 minor resistance intact, to 1.1307 support. The corrective rise from 1.1215 should have completed at 1.1569. Break of 1.1307 should resume larger down trend through 1.1215 low. On the upside, above 1.1391 minor resistance will turn intraday bias neutral again.

In the bigger picture, as long as 1.1814 resistance holds, down trend down trend from 1.2555 medium term top is still in progress and should target 61.8% retracement of 1.0339 (2017 low) to 1.2555 at 1.1186 next. Sustained break there will pave the way to retest 1.0339. However, break of 1.1814 will confirm completion of such down trend and turn medium term outlook bullish.

General Trend:

• Trump Administration official dismissed report that the US rejected an offer from China for vice-ministerial level talks
• Shanghai Property index rises in early trade after drop in prior session: Trading halt for Jiayuan International [2768.HK] extended
• Consumer Discretionary companies rise in Australia, Energy and financial names decline
• Financials rise in Japan, Nikkei-weighted Softbank and Fast Retailing gain
• Japan Display gains over 8% on M&A speculation
• IBM rose over 6% post earnings, outlook above ests
• Little initial impact seen from BoJ decision and cut in inflation forecasts (as expected); USD/JPY remains below ¥110
• BoJ Gov Kuroda expected to hold post rate decision press conference around 1:30 AM EST
• Japan Dec exports have largest decline since 2016, exports to China -7% y/y
• NZD rallied as Q4 inflation came in hotter than expected, headline inflation remains below mid-point of RBNZ target range of 1-3%
• Reserve Bank of Australia (RBA) expected to revise down its economic forecasts in Feb (Westpac)
• Australia monthly jobs data due for release on Thursday
• US companies seen reporting earnings on Wednesday include Comcast, Ford, Kimberly-Clark, Lam Research, Procter & Gamble, SL Green, Texas Instruments, United Technologies (includes after hours)

Headlines/Economic Data

Japan

• Nikkei 225 opened -0.8%
• (JP) Bank of Japan (BOJ) Quarterly Outlook for Economic Activity and Prices; cuts this year GDP, raises next 2; cuts core CPI outlooks
• (JP) BOJ LEAVES INTEREST RATE ON EXCESS RESERVES (IOER) UNCHANGED AT -0.10%; AS EXPECTED
• (JP) JAPAN DEC TRADE BALANCE: -¥55.3B V ¥42.3BE; ADJ TRADE BALANCE: -¥183.6B V -¥290.7BE; Exports Y/Y: -3.8% v -1.8%e; Imports Y/Y: +1.9% v 4.0%e
• (JP) Bank of Japan (BoJ) Quarterly report on risks: Risk of financial system destabilizing not big for now but outlook warrants attention
• (JP) Bank of Japan (BoJ) Loan Officer Opinion Survey Jan Household Loan Demand Index: 3 v 0 prior
• 7203.JP Confirmed plan to establish green car batteries JV with Panasonic by the end of 2020
• 7270.JP Gunma plant has been stopped since Jan 16th due to supplier parts issue - Japan press
• (JP) Committee investigating Japan Labor Ministry data issues finds the ministry threw away statistical data that should be kept permanently, used improper methods for monthly surveys - Japan press
• (JP) Fitch affirms Japan sovereign rating at A; outlook stable

Korea

• Kospi opened -0.4%
• (KR) European Commission urges South Korea to take meaningful actions over the next three months to resolve the long-pending ratification of key international labor conventions – Yonhap
• 3659.JP Founder to sell controlling stake in co seen valued at ~KRW10T; Samsung offered to join bid, through is undecided if it will do so - Korean press

China/Hong Kong

• Hang Seng opened -0.5%, Shanghai Composite -0.2%
• (CN) CHINA PBOC CONDUCTS CNY257.5B 1-YEAR TARGETED MEDIUM-TERM LENDING FACILITY (TMLF) AT 3.15% v 3.30% at last MLF (1st use of targeted MLF)
• (US) Trump Administration reportedly turned down Chinese offer to send ministers for preparatory trade talks - FT
• (CN) White House Adviser Kudlow: earlier trade story about canceled China trade meeting is not true; there was never a planned meeting for junior ministers
• (CN) China PBoC Open Market Operation (OMO): Skips reverse repo operations for the 3rd consecutive session; Net: CNY350B drained v CNY80B drained prior
• (CN) Bureaucrats and economists in China said to be debating whether the PBoC should pursue quantitative easing or directly ‘bankroll’ government spending, notes deepening economic slowdown and issues related to transmission of current monetary policy – HK Press
• 2768.HK Chairman's share pledge in Chaungsheng released (forced to sell 93.6m shares), bank borrowings have been fully repaid (trading to resume)
• (CN) US Sec of State Pompeo: doesn't see superpower conflict with China as inevitable; Made further progress with North Korea when official visited last week
• (CN) US Chamber of Commerce and the American Chamber of Commerce in China deliver a joint report to the Office of the US Trade Representative: calling on US to focus on China’s technology plans when trade talks resume – SCMP
• (CN) China Securities Regulator (CSRC) Vice Chairman Fang Xinghai: Does not see China significantly cutting US bond holdings - Davos comments
• (CN) The ‘Made in China 2025’ plan has been hurt by the trade war with the US, various advanced manufacturing sectors in China are seeing weakening demand – HK Press
• (CN) China Govt official: Have approached a handful of potential IPO candidates for new technology board in Shanghai and will soon release draft rules for listings – SCMP
• (CN) China PBoC sets Yuan Reference Rate: 6.7969 v 6.7854 prior

Australia/New Zealand

• ASX 200 opened -0.2%
• (NZ) NEW ZEALAND Q4 CPI Q/Q: 0.1% V 0.0%E; Y/Y: 1.9% V 1.8%E
• NST.AU Reports Q2 gold production 124K oz ; Gold sold 210.5K oz v 128.8K y/y; Affirms FY19 production while raising AISC outlook
• CGF.AU Guides H1 normalized Net A$200M; Pretax A$270M; Cuts FY19 normalized Pretax A$545-565M (prior A$591-613M)
• (AU) Australia Dec Westpac Leading Index m/m: -0.2% v -0.1% prior (1st consecutive decline since 2016)
• (AU) Australia sells A$900M v A$900M indicated in 2.75% Nov 2029 bonds, avg yield 2.2988%
• (NZ) New Zealand RBNZ Q4 Sectoral Factor Model Inflation Y/Y: 1.7% v 1.7% prior; Sectoral Factor Model Non-Tradeable (core) Y/Y: 2.7% v 2.7% prior

Other Asia

• (TH) Thailand Finance Ministry: Do not expect any rate hikes in 2019
• (TH) Thailand Royal Decree calls for elections in 2019

North America

• (US) Bureau of Labor Statistics: furloughed govt workers to be counted as employed in January payrolls
• (US) Senate leaders agree to hold vote on Trump's proposal and a Democratic proposal for reopening the govt; Neither bill is likely to pass this week, but may be seen as a small step toward compromise on the govt shutdown - press
• (US) US federal courts spokesperson: have enough funding to stay open through Jan 31st but not beyond that
• (US) Senate Finance Committee to hold hearing on drug pricing on Jan 29th
• IBM Reports Q4 $4.87 v $4.81e, Rev $21.8B v $21.7Be

Europe

• (UK) Labour Party likely to back Cooper-Boles Brexit plan, with a sensible Brexit delay
• (CZ) Czech Central Bank Holub (chief economist): External developments roughly compensate for weaker than thought currency, rates may not rise for several meetings
• RNO.FR Chairman Carlos Ghosn is considering resigning as Renault Chairman and CEO - Japan press

Levels as of 12:50ET

• Hang Seng -0.1%; Shanghai Composite -0.1%; Kospi +0.2%; Nikkei225 -0.1%; ASX 200 -0.3%
• Equity Futures: S&P500 +0.2%; Nasdaq100 +0.2%, Dax +0.5%; FTSE100 +0.3%
• EUR 1.1358-1.1378; JPY 109.33-109.80; AUD 0.7117-0.7143; NZD 0.6742-0.6785
• Feb Gold 0.0% at $1,283/oz; Mar Crude Oil +0.2% at $53.11/brl; Mar Copper +0.4% at $2.67/lb

Daily Pivots: (S1) 1.2883; (P) 1.2929; (R1) 1.3004; More....

Intraday bias in GBP/USD remains neutral with focus now back on 1.3001 temporary top. Break there will resume whole rebound from 1.2391 and target 1.3174 resistance, which is close to 38.2% retracement of 1.4376 to 1.2391 at 1.3149. We'd expect strong resistance from there to limit upside, at least on first attempt. For now, further rise is expected as long as 1.2668 minor support holds, even in case of another retreat. But break of 1.2668 support will argue that such rebound is completed and turn bias back to the downside for retesting 1.2391 low.

In the bigger picture, whole medium term rebound from 1.1946 (2016 low) should have completed at 1.4376 already, after rejection from 55 month EMA. The structure and momentum of the fall from 1.4376 argues that it's resuming long term down trend from 2.1161 (2007 high). And this will remain the preferred case as long as 1.3174 structural resistance holds. GBP/USD should target a test on 1.1946 first. Decisive break there will confirm our bearish view. However, sustained break of 1.3174 will invalidate this case and turn outlook bullish.

Risk sentiments stabilized in Asia today despite the selloff in US overnight. But so far, momentum for rebound in stocks is very weak. Major indices are stuck in right range between gains and losses, in particular in China and Hong Kong. Yen is trading as the weakest one for the moment, partly also thanks to BoJ's sharp downward revision in fiscal 2019 inflation forecast. Swiss Franc follows as second weakest. On the other hand, New Zealand Dollar is boosted by better than expected CPI data, which reduces bets on RBNZ rate cut. Australian Dollar follows as second strongest. But Aussie's recovery, similar to stocks, lacks conviction.

Technically, Sterling's rise now puts near term resistance levels into focus. Those levels include 1.3001 in GBP/USD, 142.22 in GBP/JPY and 0.8763 in EUR/GBP. Decisive break will likely bring more broad based rally in the Pound. Yen's recovery yesterday proves to be rather short-lived. Focus is back on 109.89 in USD/JPY and 125.09 in EUR/JPY. Break will resume recent rebound in yen crosses. Meanwhile, AUD/USD is still pressing 0.7116 minor support. Firm break there will indicate near term bearish reversal.

In other markets, Nikkei closed down -0.14% at 20593.72. Hong Kong HSI is up 0.02%. China SSE is up 0.01%. Singapore Strait Times is down -0.48%. Japan 10-year JGB yield is up 0.0016 at 0.003, turned positive. Overnight in the US, DOW dropped -1.22%. S&P 500 dropped -1.42%. NASDAQ dropped -1.91%. 10-year yield dropped -0.054 to 2.730.

BoJ stands pat, sharp downward revision in fiscal 2019 inflation forecast

BoJ left monetary policies unchanged today as widely expected. New economic projections are also released with upgrade in fiscal 2019 and 2020 GDP forecasts. But inflation forecasts was lowered rather sharply for fiscal 2019.

The short term interest rate is held unchanged at -0.1%. And under the yield curve control frame work, BoJ will continue to kept 10-year JGB yield at around 0%, with some upward and downward movements allowed. The annual amount of JGB purchase will be kept at JPY 80T.

Member G. Katakoa dissented as usual, pushing to strengthen monetary easing. Y Harada also dissented again, criticizing that allowing the long-term yields to move upward and downward to some extent was too ambiguous

On economy, BoJ maintained that "Japan's economy is likely to continue on an expanding trend through fiscal 2020." Also, "overseas economies are expected to continue growing firmly on the whole, although various developments of late warrant attention such as the trade friction between the United States and China."

In the new GDP projections, comparing with October forecasts:

• Fiscal 2018 is revised to 0.9% to 1.0% (median 0.9%), down from 1.3% to 1.5% (median 1.4%).
• Fiscal 2019 is revised to 0.7% to 1.0% (median 0.9%), up from 0.8% to 0.9% (median 0.8%).
• Fiscal 2020 is revised to 0.7% to 1.0% (median 1.0%), up from 0.6% to 0.9% (median 0.8%).

The revisions showed that while BoJ is optimistic for 2019, it also sees larger uncertainties.

In new core CPI projections, comparing with October forecasts, and exclude effect of sales tax hike:

• Fiscal 2018 is revised to 0.8% to 0.9% (median 0.8%), down from 0.9% to 1.0% (median 0.9%).
• Fiscal 2019 is revised to 0.8% to 1.1% (median 0.9%), down sharply from 1.3 to 1.5% (median 1.4%).
• Fiscal 2020 is revised to 1.2% to 1.4% (median 1.4%) down from 1.4% to 1.6% (median 1.5%).

The downside revision in fiscal 2019 core CPI is rather steep.

Also from Japan, trade deficit narrowed to JPY -0.18T in December versus expectation of -0.49T. All industry activity index dropped -0.3% mom in November versus expectation of -0.4% mom.

NZD jumps on solid CPI, bets on RBNZ cut recede

New Zealand Dollar is lifted notable today but better than expected consumer inflation data. CPI rose 0.1% qoq in Q4 versus expectation of 0.0% qoq. On annual basis, CPI was unchanged at 1.9% yoy, above expectation of 1.8% yoy. The data eased worries that inflation outlook is worsening and chance for a rate cut by RBNZ is reduced. Majority of economists are still expecting the next move to be a hike. But for now, there is no time frame for that move yet.

Meanwhile, the outlook is still clouded by fading momentum in the economy, as show in recent forward-looking indicators. There is question on whether domestic inflation could sustain. And should data ahead disappoint, there bets on rate cut will re-emerge.

WH Kudlow denies cancelling meeting with China, reiterates importance of enforcing promises

There were rumors that Trump's administration declined, or cancelled, a second deputy-level meeting with China on trade. The meeting was intended for preparation on the top level meeting between US Trade Representative Robert Lighthizer and Chinese Vice Premier Liu He. There were various versions of the rumor. But the key message was that the US is not satisfied with the lack of concrete progress on intellectual property theft and forced technology transfer. China's offer to buy more goods from the US is simply not enough.

But White House economic advisor Larry Kudlow came out denying the rumor and said there was "no cancellation". And he maintained the high-level meeting later this month between Lighthizer and Liu was "very, very important" and "determinative." And, "There were no other intermediate meetings scheduled," while "The story is unchanged. We are moving towards negotiations."

Yet, Kudlow also emphasized that "enforcement is absolutely crucial to the success of these talks." "Promises are great but enforcement is what we want -- things like deadlines and timetables and full coverage of the various structural issues," he said. "Will this all be solved at the end of the month? I don't know. I wouldn't dare to predict."

US Senate to hold competing votes to end government shutdown

The US Senate will hold two competing votes on Thursday as effort to end the record government shut down. Trump's plan, which includes USD 5.7B for border wall will be voted on. Also, Democrat's proposal, to reopen government through February 8, will also be voted on. It's seen as a concession by Senate Majority Leader Mitch McConnell who previously refused to vote on a bill that Trump would veto.

Trump includes a provisional three-year work permits for the youngsters under Deferred Action for Childhood Arrivals program as bargaining chip. But his plan is still likely to be voted down as Democrats have open rejected to compromise on the issue.

The Democrats could gain enough support from Senate Republicans rebels to vote for their proposal, which was already pass in the House. However, even so, Trump will likely veto even if the Democrat's bill is passed in the Senate. The Democrats are way short of two-third majority to override Trump's veto.

So, the shutdown might still extend beyond Thursday.

Looking ahead

UK CBI trends total orders is the only feature in European session. Later in the day, Canada will release retail sales. US will release house price index. Eurozone will release consume confidence.

GBP/USD Daily Outlook

Daily Pivots: (S1) 1.2883; (P) 1.2929; (R1) 1.3004; More....

Intraday bias in GBP/USD remains neutral with focus now back on 1.3001 temporary top. Break there will resume whole rebound from 1.2391 and target 1.3174 resistance, which is close to 38.2% retracement of 1.4376 to 1.2391 at 1.3149. We'd expect strong resistance from there to limit upside, at least on first attempt. For now, further rise is expected as long as 1.2668 minor support holds, even in case of another retreat. But break of 1.2668 support will argue that such rebound is completed and turn bias back to the downside for retesting 1.2391 low.

In the bigger picture, whole medium term rebound from 1.1946 (2016 low) should have completed at 1.4376 already, after rejection from 55 month EMA. The structure and momentum of the fall from 1.4376 argues that it's resuming long term down trend from 2.1161 (2007 high). And this will remain the preferred case as long as 1.3174 structural resistance holds. GBP/USD should target a test on 1.1946 first. Decisive break there will confirm our bearish view. However, sustained break of 1.3174 will invalidate this case and turn outlook bullish.

Economic Indicators Update

Could PM Theresa May be running the clock to trigger a Brexit delay? A looming bipartisan amendment from the Conservative Party's Boles and Labour's Cooper to aim at forcing to extend Article 50 in the event that no deal is reached by Feb 26th is likely to be approved. More delay would increase chances of Parliament to push for a 2nd referendum (GBP-positive). And with regards to the backstop (the main sticking point opposed by the DUP), the EU would have to offer May some concession on it (such as agreeing on some sort of finality or a clearer duration to keeping the UK in the Customs Union to facilitate Irelands' border situation). If the EU and May agree on such a deal, both the DUP and the Eurosceptic ERG (European Research Group) will likely approve May's deal--another solid positive for sterling. The Premium video highlighting last night's trade is posted below. On Friday, the Long DOW Premium trade hit its final target of 24630 from the 24080 entry. No Index trades are currently open.

Stronger than expected UK earnings data (3.4% from 3.3% y/y) and a drop in Nov unemployment to 3.9% from 4.0% have also helped the pound. Germany's ZEW current situation index dropped to 27.6 in January from 45.3. US new home sales are due at 10:00 Eastern (15:00 GMT/London). The ECB decision/press conference are due on Thursday.

Profit taking continues following report on US/China trade talks

European equity markets are poised to open slightly in the red on Wednesday, extending what has so far been a loss making start to the week as Asia offers little direction for traders.

The four week rally in equities appears to have taken a breather, with a relative absence of solid news flow probably contributing to the profit taking that we’re seeing. We seem to be running on a lot of speculation at the moment, particularly where the US and China trade talks are concerned, which makes forming a judgement all the more difficult.

The latest report from the FT - that was denied shortly after by White House economic advisor Larry Kudlow – suggested that the US had turned down an offer of preparatory trade talks ahead of Chinese Vice Premier Liu He’s visit at the end of the month.

USD supported following report as gold sees risk-off support

The US dollar was slightly bid following these reports, although it failed to give back these gains later on when Kudlow denied them. This may suggest that traders see some validity in the initial report, despite the denial, although I don’t expect it changes too much. Both sides appear encouraged by the progress so far and with a little over a month to go until the 90 day period expires, we should soon have a much better idea as well. The dollar is a decent barometer of how the talks are going, with the greenback being preferred during the escalation phase and the reverse being true as both sides have sought to work towards a solution.

Gold is looking a little flat on the day, like many other instruments it would seem. While $1,300 continues to elude it, it did get a small boost on Tuesday as equity markets traded in the red. Risk appetite has improved a lot recently which has taken some of the shine off it and it would appear a brief pause here offered some near-term support.

Oil stumbles but remains bullish

Risk appetite has also played a big role in the movements in oil over the last month or so as well, with the aggressive sell-off into year-end coincided with broader risk-off trading. It’s therefore little surprise to see that the pause we’re seeing this week across the board is taking the edge off Brent and WTI just as both near notable resistance levels, around $65 and $55, respectively.

These continue to look bullish though, even if the near-term may see some softness. As long as Brent holds above $59 and WTI $50, I still think these look bullish going forward but that doesn’t mean we can’t see some consolidation for now after 25%+ gains over the last month. This should be well supported by the success of the output cuts from OPEC+ which we won’t be seeing yet.

Short term Elliott Wave view in FTSE suggests that the decline to 6534.59 ended wave ((A)). Wave ((B)) bounce is in progress as a zigzag Elliott Wave structure. Up from 6534.59, wave (A) ended at 7001.94. The internal of wave (A) unfolded as a 5 waves Impulse Elliott Wave structure. Wave 1 ended at 6752.54, wave 2 ended at 6599.48, wave 3 ended at 6938.31, wave 4 ended at 6860.82 and wave 5 of (A) ended at 7001.94.

Wave (B) is currently in progress to correct cycle from December 27, 2018 low as a Flat Elliott Wave structure. Down from 7001.94, wave A ended at 6841.74 and wave B ended at 6987.93. Wave C remains in progress as a 5 waves where wave ((i)) of C ended at 6880.69. Short term, while wave ((ii)) bounce stays below 6987.93, Index can see more downside to end the 5 waves down in wave C of (B). Potential target for wave (B) is 6646 – 6769, which is 50 – 76.4 Fibonacci retracement from December 27, 2018 low. Afterwards, as far as pivot at 6534.59 low stays intact in the pullback, Index can resume higher again.

FTSE 1 Hour Elliott Wave Chart

Market movers today

Today is a relatively quiet day ahead of the important day tomorrow, with the Norges Bank meeting, ECB meeting and preliminary PMIs.

In Sweden, the 'small' prospera inflation expectations survey is due.

In the euro area, the consumer confidence indicator for January is due out at 16:00 CET.

Selected market news

The US equity markets struggled yesterday given the uncertainty over trade talks between the US and China and this morning a number of the Asian equity markets have followed the negative sentiment from the US, although losses has been modest. 10Y US Treasury yields fell a few basis points yesterday. Hence, the flight to safe assets is still there.

As expected, the Bank of Japan kept its QQE with yield curve control and its forward guidance unchanged at a meeting ending this morning. At the same time, it cut the inflation outlook significantly by 0.5pp in the fiscal year (Apr-Mar) 2019. The growth outlook was also cut but only for the current fiscal year whereas the FY 2019 and FY 2020 forecasts were revised slightly upwards. On the recent global development, the BoJ kept the sentence 'overseas economies have continued to grow firmly on the whole'. This highlights that the BoJ expects the current global slowdown to be temporary and the recent weak Japanese export figures to bounce back once a trade agreement has been reached between the US and China.

For the 24 hours to 23:00 GMT, the EUR declined 0.06% against the USD and closed at 1.1363.

Data revealed that the Euro-zone's ZEW economic sentiment index rose to a level of -20.9 in January, compared to a level of -21.0 in the prior month.

Separately, in Germany, the ZEW economic sentiment index unexpectedly advanced to a 4-month high level of -15.0 in January, compared to a reading of -17.5 in the previous month. Market participants had expected the index to drop to a level of -18.5. On the other hand, the nation's ZEW current situation index dropped sharply to 27.6 in January, marking its lowest level since January 2015 and more than market expectations for a fall to a level of 43.3. In the preceding month, the index had recorded a level of 45.3.

In the US, data showed that the US existing home sales declined to a 3-year low level of 6.4% to an annual rate of 4.99 million in December, suggesting a further slowdown in the housing market.. Existing home sales had recorded a revised reading of 5.33 million in the previous month. Market participants had expected existing home sales to drop to a level of 5.24 million.

In the Asian session, at GMT0400, the pair is trading at 1.1363, with the EUR trading flat against the USD from yesterday's close.

The pair is expected to find support at 1.1341, and a fall through could take it to the next support level of 1.1320. The pair is expected to find its first resistance at 1.1379, and a rise through could take it to the next resistance level of 1.1396.

Looking forward, investors would closely monitor the Euro-zone's consumer confidence index for January, slated to release later in the day. Later in the day, the US house price index for November and the Richmond Fed manufacturing index for January along with the MBA mortgage applications, will keep traders on their toes.

The currency pair is showing convergence with its 20 Hr and 50 Hr moving averages.