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On Friday, the US dollar strengthened against a basket of major currencies amid optimism in trade relations between the US and China. As it is known, both countries want to reach a compromise in trade issues. On January 30-31, Vice Premier Liu He should visit Washington. The US dollar index (#DX) updated the two-week high and closed in the positive zone (+0.29). Today, the US financial markets are closed due to the Martin Luther King Day.

On Friday, the British pound weakened against the US dollar after the publication of weak economic reports. Thus, the volume of retail sales in the UK fell by 0.9% in December, while experts expected a decline of 0.8%. Previous data were also revised downward from 1.4% to 1.3%. The core retail sales index counted to 2.6% instead of 3.9%. Today, during the Asian trading session data on China's GDP (y/y) were published, the figure counted to 6.4% in the fourth quarter, as investors forecasted. Industrial production rose to 5.7% in December instead of 5.3%.

The "black gold" prices are falling. At the moment, futures for the WTI crude oil are testing $53.85 per barrel.

Market Indicators

On Friday, the bullish sentiment was observed in the US stock market: #SPY (+1.33%), #DIA (+1.33%), #QQQ (+0.99%).

The 10-year US government bonds yield is at the level of 2.77-2.78%.

The Economic Calendar for 21.01.2019:

Today, the news feed is fairly calm. The US financial markets are closed due to the Martin Luther King Day.

The EUR/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.13912
Open: 1.13603
% chg. over the last day: -0.31
Day's range: 1.13739 – 1.13865
52 wk range: 1.1214 – 1.2557

On Friday EUR/USD was in a bearish mood. The USD strengthened against the EUR due to positive breakthrough in the US/China trading conflict. Right now the technical picture is ambiguous. You should open positions key levels are 1.13650-1.14000. Further descend is possible.

The Economic News Feed for 21.01.2019 is calm. The financial markets are closed due to Martin Luther King day.

The indicators point to the power of the buyers, the price fixed below 50 MA and 200 MA.

The MACD histogram is close to 0.

The Stochastic Oscillator is in the neutral zone, the %K line is below the %D line which points to the bearish mood..

Trading recommendations

Support levels: 1.13650, 1.13300
Resistance levels: 1.14000, 1.14400, 1.14750

If the price fixed below 1.13650 expect the quotes to fall toward 1.13300-1.130000.

Alternatively the quotes can grow toward 1.14400-1.14600.

The GBP/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.29845
Open: 1.28766
% chg. over the last day: -0.86
Day's range: 1.28375 – 1.28488
52 wk range: 1.2438 – 1.4378

On Friday GBP/USD was in an agressive sell-off due to the weak economic reports. The volume of the retail sales lowered by 0.9% in December while the experts predicted 0.8%. Previous data were also reviewed for the worse - from 1.4% to 1.3%. The basis retail sale index reached 2.6% instead of 3.9%. You should open positions from the key levels of 1.28300 and 1.28750. The trading instrument can descend further.

The Economic News Feed for 21.01.2019 is calm.

Economic Event (GB) – 00:00 (GMT+2:00);

Economic Event (GB) – 00:00 (GMT+2:00);

Economic Event (GB) – 00:00 (GMT+2:00);

The indicators do not provide precise signals, the price is testing 50 MA.

The MACD histogram is in the negative zone but above the signal line which gives a weak signal to sell GBP/USD.

The Stochastic Oscillator is in the neutral zone, the %K line is below the %D line which points to a bearish mood.

Trading recommendations

Support levels: 1.28300, 1.27900, 1.27500
Resistance levels: 1.28750, 1.29200, 1.29700

If the price fixes below 1.28300, look for the market entry points to open short positions. The movement will tend toward 1.27900-1.27700.

Alternatively the quotes can grow toward 1.29200-1.29450.

The USD/CAD currency pair

Technical indicators of the currency pair:

Prev Open: 1.32740
Open: 1.32597
% chg. over the last day: -0.14
Day's range: 1.32829 – 1.32890
52 wk range: 1.2248 – 1.3664

USD/CAD is in a variety of trends. On Friday Canada published an economic report which said that the basis consumer price index in December lowered by 0.2%, as expected. Right now the key levels are 1.32650 and 1.33000. You should open positions from these levels.

The Economic News Feed for 21.01.2019 is calm.

The price fixed above 50 MA and 200 MA which points to the power of the buyers.

The MACD histogram is close to 0. There are no signals at the moment.

The Stochastic Oscillator is in the overbought zone, the %K line is above the %D line, which gives a weak signal to buy USD/CAD.

Trading recommendations

Support levels: 1.32650, 1.32400, 1.32100
Resistance levels: 1.33000, 1.33250

If the price fixes above the round 1.33000 consider buying USD/CAD. The movement will tend toward 1.33250-1.33500

Alternatively the quotes can fall toward 1.32400-1.32200.

The USD/JPY currency pair

Technical indicators of the currency pair:

Prev Open: 109.212
Open: 109.695
% chg. over the last day: +0.49
Day's range: 109.584 – 109.631
52 wk range: 104.56 – 114.56

On Friday the USD/JPY was in a bullish mood. The quotes grew by 70 points. At the moment, the technical picture is ambiguous, the investors are waiting for additional drivers. The key levels are 109.450 and 109.750. A technical correction is possible soon.

The Economic News Feed for 21.01.2019 is calm.

The price fixed above 50 MA and 200 MA which points to the power of the buyers.

The MACD histogram is in the positive zone but below the signal line, which gives aweak signal to buy USD/JPY.

The Stochastic Oscillator is in the neutral zone, the %K line is crossing the %D line. There are no signals at the moment.

Trading recommendations

Support levels: 109.450, 109.100, 108.750
Resistance levels: 109.750, 110.00

If the price fixes below 109.450, the quotes will correct toward 109.100-108.750.

Alternatively the quotes can grow toward 110.000.

EUR/USD has started the trading week with small gains. Currently, the pair is trading at 1.1373, up 0.09% on the day. In economic news, German PPI declined by 0.4%, the first decline since February 2018. On Tuesday, Germany releases ZEW Economic Sentiment.

The markets were treated to disappointing news on Monday, with the release of Chinese data. The number 2 economy in the world grew 6.6% in 2018, marking its lowest level since 1990. GDP for the fourth quarter dipped to 6.4%, compared to 6.5% in the previous quarter. The soft GDP release comes on the heels of soft trade and manufacturing data, pointing to a slowdown duw to the ongoing U.S-China trade war. The Trump administration has threatened further tariffs if a deal is not reached by March 1 , but a second round of negotiations between the sides is scheduled for the end of the month in Washington. Chinese officials will be under pressure to show more flexibility in the talks, in order to stem the economic bleeding.

The eurozone economy has softened in recent months, although the economy grew in 2018. The U.S-China trade war has taken a bite out of economic activity, and the eurozone export and manufacturing sectors have slowed. Germany, the largest economy in the bloc, has also been affected and growth for 2019 has been revised downwards. If the trade war continues or the U.S. economy slows down in 2019, the eurozone could lapse into a recession. Bottom line? The ECB, which finally terminated its massive stimulus program last month, is unlikely to raise rates before the fourth quarter of 2019. Just a few months ago, analysts were predicting a rate hike in the third quarter. This means that the euro will have to contend against the dollar without the benefit of higher rates, which would make the euro more attractive to investors.

The Aussie edged lower in early European session and erases gains made after stronger than expected China's IP data, released in Asia on Monday. Stronger US dollar in early Monday adds to fresh weakness, also supported by negative signals from daily techs (formation of 5/10SMA and 5/100SMA bear-crosses and weakening momentum). Near-term structure weakened after recovery leg off 0.6706 spike low (3 Jan) stalled at daily cloud base and subsequent easing resulted in bearish close last week. Further bearish signals could be expected on violation of 30SMA (0.7135) and more significant support at 0.7110 (20SMA/Fibo 23.6% of 0.6706/0.7235 upleg) break of which would generate stronger bearish signal for acceleration towards 0.7033/00 (Fibo 38.2%/psychological support). Broken converged 10/100SMA's (0.7175) cap for now and guard daily cloud base (0.7207), clear break of which is needed to bring bulls back to play.

Res: 0.7175, 0.7207, 0.7235, 0.7282
Sup: 0.7135, 0.7110, 0.7033, 0.7000

Upside risks prevailed in the market on Friday, thus sending the common European currency to gain about 65 base points against the Japanese Yen. The currency pair tested the upper boundary of an ascending channel pattern during the end of Friday's trading session.

However, after hitting the up border of the channel pattern at 125.00, the exchange rate made a brief retracement down.

In the meantime, it is likely that the Euro will maintain the ascending channel pattern until a breakout through the lower boundary occurs.

Although, a support cluster formed by the weekly and monthly PPs could prevent the southern breakout to happen today.

The Australian Dollar has been moving in a one-week descending channel pattern against the US Dollar. The currency pair tested the upper boundary of the descending channel several times on Friday.

The 50-hour simple moving average was providing resistance for the exchange rate at 0.7177 during the first half of Monday's trading session.

In case bears continue to dominate the currency exchange rate within this session, a potential decline towards a support level formed by the weekly S3 at 0.7131 could be expected today

The US Dollar has been trading in a two-week ascending channel against the Canadian Dollar. The currency pair re-tested the bottom border of the channel pattern during Friday's trading session.

The USD/CAD exchange rate breached both the 50– and 100-hour simple moving averages during the first half of today's trading session.

Given that the currency exchange rate has breached the moving averages, bullish traders could push the rate towards a resistance cluster at 1.3315 today.

However, technical indicators demonstrate that bears will dominate the pair within this session.

The NZD/USD exchange rate has been trading in a junior descending channel pattern since the middle of January. The New Zealand Dollar re-tested the upper boundary of the channel pattern on Friday.

The 50-hour simple moving average pressured the currency pair further south during the first part Monday's trading session.

Meanwhile, technical indicators suggest that the bearish momentum is likely to continue within this session.

If this decline continues, a breakout through the lower boundary of the descending channel pattern is likely to occur today.

Weakened USA, weakened EU

Coming up to the USA's federal government shutdown, the American economy was in acceleration mode. Although new data are scant, it appears shutdown will have more negative effect than originally forecast. Traders should be prepared for disappointment. The US yield curve continues to flatten; consumer sentiment has weakened. The chaos on Capitol Hill mirrors the real effect of the shutdown on American life.

Meanwhile in the EU, most of the negatives, especially weak German growth, have been priced in to the single currency. Moving forward we can expect a pick up. While the global economic backdrop is hazy, fiscal conditions are loosening. Germany's ruling party has indicated tax cuts while France has rolled back its interest rate hike. This week the European Central Bank is expected to signal a rate hike for September 2019.

Brexit stalemate confuses traders

A Brexit delay looks likely, but this does not necessarily give a resolution. If the new European Parliament votes in May 2019 not to give further concessions to the UK, including on the Irish backstop, a second referendum or even general elections in the UK are likely. For now, long GBP trades are highly speculative, although the risk of a hard Brexit is subdued for now. Traders should not get hypnotized by the hype: Brexit has now migrated from the logical to the political, making predictions merely guesswork.

Although investors are currently supporting a bullish GBP bias, that trend could rapidly change. The next event will be presentation of a Brexit Plan B later today: its reception remains highly uncertain. Postponement of the current Brexit deadline of 29 March 2019, which would require approval of the EU members, remains the most realistic solution for now. This would allow the UK to buy three more months, until EU elections kick off on 23 May.

During Friday's trading session, the currency exchange rate depreciated to the 1.1340 level. However, on Monday morning, the European Single Currency recovered against the US Dollar to the 1.1381 mark.

In regards to the near-term future, most likely, the 55-hour and the 100-hour simple moving averages will continue retracing the rate to push the European Single Currency to depreciate against the US Dollar.

Moreover, it is expected that the currency exchange rate will be trading at the 1.1340 level during the trading session.